1 00:00:01,836 --> 00:00:03,879 [Chelsea] Jadie, are we good? Okay, good. 2 00:00:03,964 --> 00:00:05,382 [Stewart] I say we bring it. 3 00:00:06,174 --> 00:00:08,885 [Chelsea] What was it like when your savings account 4 00:00:08,969 --> 00:00:11,805 gave you 5% interest 5 00:00:11,888 --> 00:00:16,518 as opposed to what I get which is a $15 fee for every time I bounce a check. 6 00:00:16,601 --> 00:00:17,727 - [Stewart] Yes. - [producers laugh] 7 00:00:17,811 --> 00:00:22,107 It costs you money now to save your money. 8 00:00:22,190 --> 00:00:24,025 You used to be able to save your money and make money. 9 00:00:24,109 --> 00:00:25,443 I didn't even know that was an option. 10 00:00:25,527 --> 00:00:26,903 Completely impossible. 11 00:00:26,987 --> 00:00:30,615 The reason that your savings account interest rate is so low 12 00:00:30,699 --> 00:00:33,868 is because they're literally trying to incentivize you to invest... 13 00:00:33,952 --> 00:00:36,663 - [Stewart] Yes. - ...by taking away the incentive to save. 14 00:00:36,746 --> 00:00:37,747 It's like zero interest. 15 00:00:37,831 --> 00:00:42,210 There's no other option in this world than stocks. 16 00:00:42,294 --> 00:00:46,548 My bank's savings account interest rate looks like a blood-alcoholic level. 17 00:00:46,631 --> 00:00:49,384 [laughing] 18 00:00:49,467 --> 00:00:51,803 But it's not going to jail 'cause it's not that high. 19 00:00:51,887 --> 00:00:52,888 - Yeah. - [laughing] 20 00:00:52,971 --> 00:00:55,849 So when you go into your bank, do they say, "Blow into this." 21 00:00:55,932 --> 00:00:57,517 - [laughing] - And whatever registers, 22 00:00:57,601 --> 00:01:00,562 - that's what they give you. - [laughing fades] 23 00:01:31,801 --> 00:01:33,970 [audience cheering, applauding] 24 00:01:41,019 --> 00:01:42,729 Hello! 25 00:01:42,812 --> 00:01:45,106 Why, I-- Hello! 26 00:01:45,190 --> 00:01:47,776 Uh, no! I'm delighted! 27 00:01:47,859 --> 00:01:49,277 Good evening! 28 00:01:49,361 --> 00:01:51,988 Good morning! I don't know when you're watching this. 29 00:01:52,072 --> 00:01:53,240 My name is Jon Stewart. 30 00:01:53,323 --> 00:01:57,202 Welcome to an episode of what the kids are calling "Not Ted Lasso." 31 00:01:57,285 --> 00:01:58,578 [audience laughing] 32 00:01:58,662 --> 00:01:59,913 It's Apple. 33 00:01:59,996 --> 00:02:04,000 Tonight we're gonna be talking about the stock market, as-- 34 00:02:04,084 --> 00:02:05,752 - [scattered cheers] - Really? 35 00:02:05,835 --> 00:02:06,962 [audience laughs] 36 00:02:07,045 --> 00:02:08,796 A "whoo" for the stock market. 37 00:02:09,631 --> 00:02:12,717 Millions of Americans talk about the stock market every day, 38 00:02:12,801 --> 00:02:16,471 from the ballrooms of the richest Connecticut country clubs 39 00:02:16,555 --> 00:02:19,683 to the ballrooms of some of the poorer Connecticut country clubs. 40 00:02:19,766 --> 00:02:21,518 [audience laughs] 41 00:02:21,601 --> 00:02:26,022 No matter what's happening in the world, all eyes are always on the market. 42 00:02:26,106 --> 00:02:29,401 We stock-watch while waiting to find out who's going to be president. 43 00:02:29,484 --> 00:02:32,070 We stock-watch while globally warming. 44 00:02:32,153 --> 00:02:35,323 And neither Santa nor a global pandemic 45 00:02:35,407 --> 00:02:39,327 can distract us from our minute-to-minute check-in. 46 00:02:39,411 --> 00:02:43,331 All happening just below Larry Kudlow's nipples. Oh, look at him. 47 00:02:43,415 --> 00:02:44,874 [audience laughs] 48 00:02:44,958 --> 00:02:48,628 But our national obsession came from quite humble roots. 49 00:02:49,212 --> 00:02:51,840 The stock market began with a very simple premise. 50 00:02:51,923 --> 00:02:56,928 Let's have people invest their money in companies that they believe in. 51 00:02:57,012 --> 00:03:00,682 If the company does well, the people will do well. 52 00:03:01,474 --> 00:03:04,311 But you couldn't just drive to the company, 53 00:03:04,394 --> 00:03:05,645 give them your money. 54 00:03:06,229 --> 00:03:07,731 It'd be super weird. 55 00:03:07,814 --> 00:03:11,610 You needed a place, a building made of, let's say, marble. 56 00:03:12,986 --> 00:03:15,363 But you couldn't just go into that building made of marble 57 00:03:15,447 --> 00:03:16,698 and buy your stock. 58 00:03:17,532 --> 00:03:19,159 That'd be too much like a store. 59 00:03:20,410 --> 00:03:24,331 You'd need a broker, someone… better than you. 60 00:03:24,414 --> 00:03:25,916 [audience laughs] 61 00:03:25,999 --> 00:03:28,960 So from the beginning, it was elitist. 62 00:03:29,669 --> 00:03:33,173 To buy a stock, you had to pay a heavy commission 63 00:03:33,256 --> 00:03:38,678 to whichever college lacrosse benchwarmer turned broker you could find. 64 00:03:38,762 --> 00:03:41,139 [audience laughing] 65 00:03:41,223 --> 00:03:43,892 And the only folks more elite than the brokers 66 00:03:43,975 --> 00:03:47,354 were those who vouched for the brokers on television. 67 00:03:47,437 --> 00:03:49,814 My name is J. Paul Getty. 68 00:03:50,523 --> 00:03:54,778 The brokerage house of EF Hutton & Company is a firm with which I have had 69 00:03:54,861 --> 00:03:58,406 close and pleasant relationships for four decades. 70 00:03:58,949 --> 00:04:02,160 They have been helpful, and their service has been good. 71 00:04:05,121 --> 00:04:07,332 [audience laughing] 72 00:04:13,630 --> 00:04:15,465 [imitating Getty] It's too late for me now… 73 00:04:15,549 --> 00:04:17,968 [audience laughs] 74 00:04:18,050 --> 00:04:21,137 …for I am more couch than man. 75 00:04:21,221 --> 00:04:23,014 [audience laughs] 76 00:04:23,098 --> 00:04:26,142 More pillow than human. 77 00:04:28,103 --> 00:04:32,983 [normal] Given that the investor class was made up of literal Monopoly men, 78 00:04:33,066 --> 00:04:36,069 the stock market was wildly unequal. 79 00:04:36,152 --> 00:04:39,864 When the Federal Reserve started analyzing stock ownership in 1989, 80 00:04:39,948 --> 00:04:43,159 it found that the top 10% of households owned 81 00:04:43,243 --> 00:04:47,455 78% of the stock market. 82 00:04:48,623 --> 00:04:50,792 But the revolution was coming. 83 00:04:50,875 --> 00:04:52,127 Hark! 84 00:04:52,210 --> 00:04:55,672 - [coughs] Sorry. [laughs] - [audience laughing] 85 00:04:55,755 --> 00:04:57,549 That "hark" even scared me. 86 00:04:58,133 --> 00:04:59,259 Hark! 87 00:04:59,342 --> 00:05:01,887 Its clarion call is upon us! 88 00:05:02,512 --> 00:05:04,139 The e-brokers have arrived! 89 00:05:04,222 --> 00:05:05,223 Eight dollars, my man. 90 00:05:05,307 --> 00:05:07,350 Eight? My broker charges me $200 for this trade. 91 00:05:07,434 --> 00:05:08,894 You're riding the wave of the future, my man. 92 00:05:08,977 --> 00:05:10,186 [laughs] 93 00:05:10,270 --> 00:05:12,480 [announcer] Ameritrade. Believe in yourself. 94 00:05:12,564 --> 00:05:15,191 But is a meth-head and his father in the market… 95 00:05:15,275 --> 00:05:17,193 [audience laughs] 96 00:05:17,277 --> 00:05:19,362 …still too high a bar? 97 00:05:19,446 --> 00:05:22,324 [adult voice] You know, I conceal this bad boy underneath my blanket 98 00:05:22,407 --> 00:05:23,575 just so I can get on E-Trade. 99 00:05:23,658 --> 00:05:24,784 Click. 100 00:05:24,868 --> 00:05:26,077 I just bought stock. 101 00:05:26,161 --> 00:05:29,289 If I can do it, you can do-- [burps] 102 00:05:29,372 --> 00:05:31,499 - [retches] - [audience laughing] 103 00:05:31,583 --> 00:05:32,792 - Whoa. - [audience laughing] 104 00:05:32,876 --> 00:05:35,003 - A fucking baby. - [audience chuckles] 105 00:05:35,086 --> 00:05:39,049 If you want to get in the market, you just need to be a fucking baby with $6. 106 00:05:39,132 --> 00:05:41,092 A $6 fucking baby. 107 00:05:42,636 --> 00:05:45,305 By the way, someone needs to do a "Where are they now?" on that baby. 108 00:05:45,388 --> 00:05:46,598 [audience laughs] 109 00:05:46,681 --> 00:05:48,558 Pretty sure he's hosting a podcast 110 00:05:48,642 --> 00:05:51,019 where he's just asking questions about ivermectin. 111 00:05:51,102 --> 00:05:52,812 "I'm just asking questions!" 112 00:05:53,813 --> 00:05:56,316 And calling women "females." "They're females!" 113 00:05:56,399 --> 00:05:59,110 [audience chuckling] 114 00:05:59,194 --> 00:06:03,281 Discount e-brokers democratized the stock market. 115 00:06:03,782 --> 00:06:05,742 And inequality went... 116 00:06:06,451 --> 00:06:08,662 up? Fuck, are you serious? 117 00:06:10,205 --> 00:06:14,000 They democratized the stock market, and inequality went up! 118 00:06:14,084 --> 00:06:15,502 Are you kidding me? 119 00:06:16,419 --> 00:06:18,880 Turns out, to really democratize this market, 120 00:06:18,964 --> 00:06:23,718 we were gonna need something that completely breaks down all barriers. 121 00:06:23,802 --> 00:06:27,639 Someone had to take away fees completely. 122 00:06:27,722 --> 00:06:28,932 We'd need a hero. 123 00:06:29,558 --> 00:06:31,226 Or not a hero. 124 00:06:31,309 --> 00:06:34,437 More like an app. We'd need some kind of an app. 125 00:06:34,521 --> 00:06:35,689 There we go. 126 00:06:36,856 --> 00:06:38,191 Robin Hood. 127 00:06:38,275 --> 00:06:40,443 The OG sexy socialist. 128 00:06:40,527 --> 00:06:44,573 The bow-and-arrow Bernie Sanders, leveling the playing field, 129 00:06:44,656 --> 00:06:48,076 stealing from the rich and giving-- 130 00:06:48,159 --> 00:06:49,619 Who is he giving it to? 131 00:06:49,703 --> 00:06:51,871 [artist] Robinhood has made it extremely easy for me 132 00:06:51,955 --> 00:06:54,916 to take the income I make from my commissioned paintings 133 00:06:55,000 --> 00:06:56,585 and invest it into stocks. 134 00:06:56,668 --> 00:06:59,588 Robinhood showed me that my money can work for me. 135 00:06:59,671 --> 00:07:02,090 My name's Azim, and I'm a Robinhood user. 136 00:07:02,173 --> 00:07:04,009 - I'm an investor. - I'm an investor. 137 00:07:04,092 --> 00:07:05,427 We are Robinhooders. 138 00:07:05,510 --> 00:07:06,845 [both laughing] 139 00:07:07,637 --> 00:07:09,973 Cozy-sweatered lesbians? 140 00:07:10,056 --> 00:07:12,058 [audience laughing] 141 00:07:16,187 --> 00:07:19,149 In the stock market? Well, I never! 142 00:07:19,691 --> 00:07:21,109 [laughs] 143 00:07:21,192 --> 00:07:23,987 By the way, in the '90s, they were referred to as "just friends." 144 00:07:24,696 --> 00:07:30,076 Pray tell, how has Robinhood managed to breach the palace walls 145 00:07:30,160 --> 00:07:35,332 and throw down the drawbridge for these sweatered Lilith Fair maidens? 146 00:07:35,415 --> 00:07:36,875 Robinhood CEO, tell us. 147 00:07:36,958 --> 00:07:39,794 I think the combination of zero commissions, 148 00:07:39,878 --> 00:07:42,380 no account minimums, fractional shares 149 00:07:42,464 --> 00:07:46,051 helped level the playing field for people to participate in the markets. 150 00:07:46,760 --> 00:07:49,930 Thank you, haunted Victorian boy. 151 00:07:50,013 --> 00:07:52,224 [audience laughing] 152 00:07:57,187 --> 00:07:58,813 Zero commissions! 153 00:07:58,897 --> 00:08:02,692 And the markets were flooded with new customers. 154 00:08:02,776 --> 00:08:06,529 And not only that, on top of this no-commission model, 155 00:08:06,613 --> 00:08:09,532 the Federal Reserve's new low interest rates 156 00:08:09,616 --> 00:08:13,036 made savings accounts pretty much worthless. 157 00:08:13,119 --> 00:08:18,083 So even more stock buyers and money flowed into the stock market. 158 00:08:18,166 --> 00:08:21,670 In 2021, more money flowed into the stock market 159 00:08:21,753 --> 00:08:26,091 than in the previous 20 years combined. 160 00:08:26,174 --> 00:08:29,219 It was a golden age of wealth generation. 161 00:08:29,302 --> 00:08:35,517 The unwashed masses finally have their moment to get into the stock market, 162 00:08:35,600 --> 00:08:38,727 and it went up? Inequality went up? 163 00:08:38,812 --> 00:08:41,231 Are you fucking kidding me? 164 00:08:43,149 --> 00:08:44,609 And thus… 165 00:08:46,403 --> 00:08:48,738 "The Problem With the Stock Market." 166 00:08:49,322 --> 00:08:54,619 The grand pooh-bahs of the stock market keep creating easier access 167 00:08:54,703 --> 00:08:56,705 to this wealth machine 168 00:08:56,788 --> 00:09:02,586 yet somehow always still manage to be the greatest beneficiaries of that wealth. 169 00:09:03,295 --> 00:09:07,424 Perhaps if we examine exactly what happens when you buy a stock through Robinhood, 170 00:09:07,507 --> 00:09:10,385 we can understand the system a bit better. 171 00:09:10,468 --> 00:09:15,348 I'd pick up my phone, and I'd hit the old Robinhood "buy" button, and boom. 172 00:09:15,432 --> 00:09:18,643 My order doesn't go to the stock exchange 173 00:09:18,727 --> 00:09:21,855 because of something called "payment for order flow." 174 00:09:21,938 --> 00:09:26,067 My order somehow goes to this other company no one's heard of called Citadel. 175 00:09:26,151 --> 00:09:28,653 They're a middleman known as a market maker. 176 00:09:28,737 --> 00:09:30,864 They match buyers to sellers. 177 00:09:30,947 --> 00:09:36,870 And they have paid Robinhood hundreds of millions of dollars 178 00:09:36,953 --> 00:09:40,290 for the privilege of processing the order. 179 00:09:40,373 --> 00:09:42,834 And then Citadel or any market maker 180 00:09:42,918 --> 00:09:46,504 still doesn't have to take that order to the stock exchange. 181 00:09:46,588 --> 00:09:51,134 They just match it to other orders they've also already paid for. 182 00:09:51,718 --> 00:09:56,014 Or they slip the order into what are called dark pools. 183 00:09:56,097 --> 00:09:57,933 And dark pools are private exchanges 184 00:09:58,016 --> 00:10:01,478 where the big boys trade stocks in the dark. 185 00:10:01,561 --> 00:10:07,567 Yes, the actual name of that is dark pools. 186 00:10:08,401 --> 00:10:10,528 They named it dark pools. 187 00:10:10,612 --> 00:10:11,738 [audience laughs] 188 00:10:11,821 --> 00:10:16,243 How fucking invincible do you have to feel 189 00:10:16,326 --> 00:10:21,623 to name the place where you conduct your least transparent business dealings 190 00:10:21,706 --> 00:10:23,166 "dark pools"? 191 00:10:23,250 --> 00:10:24,793 [audience laughs] 192 00:10:24,876 --> 00:10:26,336 "Thank you for your order. 193 00:10:26,419 --> 00:10:30,507 I'll just take it down to my chamber of schemes." 194 00:10:30,590 --> 00:10:32,801 [audience laughing] 195 00:10:34,469 --> 00:10:38,265 So now we know why Robinhood is free to use. 196 00:10:38,348 --> 00:10:41,142 They're being paid hundreds of millions of dollars 197 00:10:41,226 --> 00:10:45,146 by middlemen for the privilege of processing stock orders. 198 00:10:45,230 --> 00:10:48,233 So we know who their real boss is. 199 00:10:48,316 --> 00:10:51,444 But why the fuck would these guys pay hundreds of millions of dollars 200 00:10:51,528 --> 00:10:53,363 for that privilege? 201 00:10:53,446 --> 00:10:55,949 Let's ask Citadel CEO Ken Griffin. 202 00:10:56,032 --> 00:10:58,535 Payment for order flow is a cost to me. 203 00:10:59,911 --> 00:11:01,121 Oh, well, yes. 204 00:11:01,204 --> 00:11:04,249 It-- It costs you hundreds of millions of dollars. 205 00:11:05,083 --> 00:11:06,501 Why would you do it? 206 00:11:06,585 --> 00:11:11,673 We want to hold on to this democratization of finance that's taken place. 207 00:11:11,756 --> 00:11:15,218 If payment for order flow helps to maintain that as a reality, 208 00:11:15,302 --> 00:11:17,012 I think that's good for everybody. 209 00:11:17,846 --> 00:11:19,598 You're a really good person. 210 00:11:19,681 --> 00:11:21,892 [audience laughs] 211 00:11:21,975 --> 00:11:23,768 See, Ken Griffin, he's just a nice guy. 212 00:11:23,852 --> 00:11:28,481 He's going broke to create this democratization of markets. 213 00:11:28,565 --> 00:11:29,858 Obviously not that broke. 214 00:11:29,941 --> 00:11:32,986 He-- He does live in literally the most expensive house 215 00:11:33,069 --> 00:11:36,156 in the history of the United States of America. 216 00:11:36,239 --> 00:11:39,743 And also spends time at his other house here, 217 00:11:39,826 --> 00:11:41,995 and this other one here, 218 00:11:42,078 --> 00:11:44,331 and then there's this one here, 219 00:11:44,414 --> 00:11:47,208 and, of course, any of these here. 220 00:11:47,292 --> 00:11:49,002 You know what? Fuck this guy. 221 00:11:50,170 --> 00:11:51,880 So what's really going on here? 222 00:11:51,963 --> 00:11:55,592 How do these particular middlemen even make money? 223 00:11:55,675 --> 00:12:00,013 Say, Jason, you want to buy a stock for $10, 224 00:12:00,096 --> 00:12:03,183 and, Caroline, you're selling it for $9.99. 225 00:12:03,266 --> 00:12:07,395 Well, they'll internalize that trade and they'll make a cent per share. 226 00:12:07,479 --> 00:12:08,730 It doesn't sound like a lot, 227 00:12:08,813 --> 00:12:10,607 but if you do it enough over and over again, 228 00:12:10,690 --> 00:12:11,942 it add-- those pennies add up. 229 00:12:12,025 --> 00:12:13,276 Huh. 230 00:12:13,360 --> 00:12:17,322 So for every trade, they're skimming pennies off the top. 231 00:12:17,405 --> 00:12:19,658 How many fucking pennies puts you in all those houses? 232 00:12:19,741 --> 00:12:20,742 Let's break this down. 233 00:12:20,825 --> 00:12:25,121 First of all, the hundreds of millions that Citadel kicks back to Robinhood 234 00:12:25,205 --> 00:12:28,500 should be going to the retail investors, or at least a cut of it. 235 00:12:28,583 --> 00:12:31,336 And the pennies they're scooping on price differential 236 00:12:31,419 --> 00:12:33,463 should also be going to the retail investors. 237 00:12:33,547 --> 00:12:37,175 I mean, who came up with payment for order flow? Bernie Madoff? 238 00:12:37,801 --> 00:12:39,427 Yes, it was actually Bernie Madoff. 239 00:12:40,845 --> 00:12:44,307 It was literally Bernie Madoff who came up with payment for order flow. 240 00:12:44,391 --> 00:12:46,101 It was-- It was Bernie Madoff. 241 00:12:46,810 --> 00:12:49,020 Bernie Madoff came up with payment for-- 242 00:12:49,104 --> 00:12:51,147 Ber-- Let me-- 243 00:12:51,231 --> 00:12:53,024 Do you know the name Bernie Madoff? 244 00:12:53,108 --> 00:12:54,317 [audience laughing, applauding] 245 00:12:54,401 --> 00:12:56,570 Bernie Madoff came up with payment for order flow. 246 00:12:56,653 --> 00:12:59,281 That's the business model that all these guys are working on. 247 00:12:59,364 --> 00:13:02,117 Bernie Madoff. Bernie Madoff! 248 00:13:02,200 --> 00:13:05,245 [audience laughing] 249 00:13:05,328 --> 00:13:07,414 This should be illegal, 250 00:13:07,497 --> 00:13:11,042 which, by the way, it is in many other countries. 251 00:13:11,126 --> 00:13:15,046 Somebody should really tell the Securities and Exchange Commission about this. 252 00:13:15,130 --> 00:13:16,840 And it turns out somebody did. 253 00:13:16,923 --> 00:13:21,303 In 2004, a whistleblower wrote a letter to the SEC, 254 00:13:21,386 --> 00:13:25,932 saying payment for order flow lacks transparency, 255 00:13:26,016 --> 00:13:28,018 is anti-competitive, 256 00:13:28,101 --> 00:13:31,521 and creates an obvious and substantial conflict of interest 257 00:13:31,605 --> 00:13:36,109 between brokers and their customers, and should be banned altogether. 258 00:13:38,153 --> 00:13:41,948 Pray tell, unmask the hero of our tale, 259 00:13:42,741 --> 00:13:45,994 the brave whistleblower from the year 2004. 260 00:13:46,077 --> 00:13:48,997 It is… [imitates fanfare] 261 00:13:49,080 --> 00:13:51,207 Citadel Investment Group! 262 00:13:51,291 --> 00:13:52,542 [audience laughing] 263 00:13:52,626 --> 00:13:54,294 It appears that these companies 264 00:13:54,377 --> 00:13:57,547 don't so much want to democratize the stock market 265 00:13:57,631 --> 00:14:00,842 as bring in chump money for their penny game. 266 00:14:01,718 --> 00:14:04,346 So, what might happen, though, 267 00:14:04,429 --> 00:14:08,725 if these new chumps bringing in all this new money got wise? 268 00:14:08,808 --> 00:14:11,770 Small investors banding together to take on big firms 269 00:14:11,853 --> 00:14:15,357 by running up the stock price of video game seller GameStop. 270 00:14:15,440 --> 00:14:18,026 [Shepard Smith] It's a stock worth just a few bucks a year ago 271 00:14:18,109 --> 00:14:20,737 and closed at $347. 272 00:14:20,820 --> 00:14:25,242 If you invested $5,000 into GameStop just two weeks ago, 273 00:14:25,325 --> 00:14:28,286 you would have made more than 86,000 bucks. 274 00:14:28,370 --> 00:14:31,790 The hedge funds that bet against it have lost billions. 275 00:14:32,540 --> 00:14:38,713 A bunch of Reddit users harnessed years of advanced meme training… 276 00:14:38,797 --> 00:14:41,716 [audience laughing] 277 00:14:41,800 --> 00:14:46,471 …to realize that the company GameStop was being massively shorted 278 00:14:46,555 --> 00:14:47,973 by hedge funds. 279 00:14:48,056 --> 00:14:51,268 Basically, hedge funds placed giant bets 280 00:14:51,351 --> 00:14:54,187 that GameStop's price would go down. 281 00:14:54,271 --> 00:14:57,357 The Reddit users thought, "Well, geez, 282 00:14:57,440 --> 00:15:00,944 why don't we all just get together and short-squeeze them?" 283 00:15:01,027 --> 00:15:04,322 Drive the price up, hold the stock, 284 00:15:04,406 --> 00:15:07,367 make a little money and, as a consequence, 285 00:15:07,450 --> 00:15:10,453 force those hedge funds into massive losses. 286 00:15:11,371 --> 00:15:12,622 And it worked. 287 00:15:13,456 --> 00:15:15,083 Really well. 288 00:15:15,667 --> 00:15:19,462 [reporter] Discount online brokerage Robinhood barred users without warning 289 00:15:19,546 --> 00:15:21,506 from buying new shares of GameStop. 290 00:15:21,590 --> 00:15:22,924 [user] I opened up the app. 291 00:15:23,008 --> 00:15:26,469 I saw that you could no longer press the "buy" button in Robinhood, 292 00:15:26,553 --> 00:15:29,180 and I said, "Holy [bleep]." 293 00:15:29,264 --> 00:15:32,642 [audience laughing] 294 00:15:32,726 --> 00:15:34,227 Don't be coy. Holy what? 295 00:15:34,311 --> 00:15:35,729 [audience laughs] 296 00:15:35,812 --> 00:15:37,564 Holy-- Holy what? Did you-- What'd you say? 297 00:15:37,647 --> 00:15:38,815 Cock? 298 00:15:38,899 --> 00:15:41,401 [audience laughing] 299 00:15:41,484 --> 00:15:43,820 Did you say-- Did you say "cock"? 300 00:15:43,904 --> 00:15:46,072 [audience laughing] 301 00:15:46,156 --> 00:15:52,245 Why would Robinhood halt buying GameStop but not selling it? 302 00:15:53,330 --> 00:15:57,709 They said it was because they received a call from their clearinghouse-- 303 00:15:58,209 --> 00:15:59,294 Le-Let's-- 304 00:15:59,377 --> 00:16:01,046 From their bookie, 305 00:16:01,129 --> 00:16:04,132 who said, "They're on their way! Get the fuck out of the house! 306 00:16:04,216 --> 00:16:06,009 They're in a black Lincoln Continental!" 307 00:16:06,593 --> 00:16:09,095 But other people were suspicious for a couple of reasons. 308 00:16:09,179 --> 00:16:12,307 One being a hedge fund called Melvin Capital, 309 00:16:12,390 --> 00:16:16,770 which racked up billions of dollars of losses in the GameStop frenzy, 310 00:16:16,853 --> 00:16:20,982 received a bailout from none other than… 311 00:16:21,066 --> 00:16:22,901 Citadel hedge fund, 312 00:16:22,984 --> 00:16:27,405 the utterly unrelated hedge fund owned by the same people 313 00:16:27,489 --> 00:16:30,450 who own Citadel Securities, 314 00:16:30,533 --> 00:16:36,414 which is the payment for order flow company that handles Robinhood orders. 315 00:16:36,498 --> 00:16:40,919 And if this sounds insane, it's because it's insane. 316 00:16:41,002 --> 00:16:43,129 Which really has to make you wonder, 317 00:16:44,256 --> 00:16:46,841 how dark are these fucking pools? 318 00:16:46,925 --> 00:16:48,593 [audience laughs] 319 00:16:48,677 --> 00:16:50,011 And here's the kicker. 320 00:16:50,762 --> 00:16:54,307 This payment for order flow situation and GameStop mess 321 00:16:55,016 --> 00:16:57,310 are the part of the American stock market 322 00:16:57,394 --> 00:17:01,856 that is the most transparent, well-regulated, and straightforward part 323 00:17:01,940 --> 00:17:03,483 of our entire market system. 324 00:17:03,567 --> 00:17:07,320 There's a whole other back room of derivatives and swaps 325 00:17:07,404 --> 00:17:12,367 and less transparent transactions with even more fuckery 326 00:17:13,285 --> 00:17:17,789 subsidized by public union pension funds. 327 00:17:18,582 --> 00:17:20,583 It's unsustainable. 328 00:17:21,376 --> 00:17:24,462 One could compare it to the subprime mortgage market 329 00:17:24,545 --> 00:17:27,757 that has capacity to blow up the world economy. 330 00:17:28,675 --> 00:17:33,221 We will never understand all of it, and we're not supposed to. 331 00:17:33,305 --> 00:17:38,476 It took a bunch of Redditors to figure out the GameStop shorting thing. 332 00:17:39,603 --> 00:17:41,605 What the hell was CNBC doing? 333 00:17:41,688 --> 00:17:42,898 Show me the money! 334 00:17:42,981 --> 00:17:44,357 [reporter] Look at all that green, baby. 335 00:17:44,441 --> 00:17:46,526 Wealth creation right in front of our eyes. 336 00:17:46,610 --> 00:17:47,569 Cha-ching. 337 00:17:47,652 --> 00:17:49,321 [Handel's "Hallelujah" chorus plays] 338 00:17:49,404 --> 00:17:50,906 Watch your money grow. 339 00:17:50,989 --> 00:17:52,407 ["Hallelujah" chorus plays] 340 00:17:52,490 --> 00:17:53,700 You're gonna make a lot of money. 341 00:17:53,783 --> 00:17:55,535 ["Hallelujah" chorus plays] 342 00:17:55,619 --> 00:17:57,037 Thank the market gods. 343 00:17:57,120 --> 00:18:00,373 Because, baby, this stock is born to run. 344 00:18:00,457 --> 00:18:02,500 [audience chuckling] 345 00:18:09,966 --> 00:18:11,927 Someone should question him publicly. 346 00:18:12,010 --> 00:18:13,053 [audience laughing] 347 00:18:13,136 --> 00:18:15,972 I'm sure that would have tremendous ramifications. 348 00:18:16,598 --> 00:18:17,849 Take a look at this. 349 00:18:19,309 --> 00:18:22,771 [announcer] Our regularly scheduled programming will not be seen at this time 350 00:18:22,854 --> 00:18:26,149 so we may bring you this CNBC special presentation. 351 00:18:30,237 --> 00:18:31,655 - This is… - [both] This is… 352 00:18:31,738 --> 00:18:33,198 - CNBC. - CNBC. 353 00:18:33,281 --> 00:18:34,199 CNBC. 354 00:18:35,367 --> 00:18:36,868 Our business is… 355 00:18:36,952 --> 00:18:38,036 - Lies. - Lies. 356 00:18:38,119 --> 00:18:39,996 - Damn lies. - Everybody lies. 357 00:18:40,080 --> 00:18:41,915 - We spread… - …propaganda. 358 00:18:41,998 --> 00:18:43,291 We sort of spread it everywhere. 359 00:18:43,375 --> 00:18:44,709 - It's all… - Nonsense and hooey. 360 00:18:44,793 --> 00:18:46,253 Phony as baloney! 361 00:18:46,336 --> 00:18:47,921 It's BS, if you will. 362 00:18:48,004 --> 00:18:49,589 - Because we're… - …bought and paid for… 363 00:18:49,673 --> 00:18:51,007 - …by… - …the system. 364 00:18:51,091 --> 00:18:52,342 - We promise… - We promise… 365 00:18:52,425 --> 00:18:53,760 - We… - …promise… 366 00:18:53,843 --> 00:18:54,844 - …we will never… - Never. 367 00:18:54,928 --> 00:18:57,889 [edited together] …give you… honest… and… transparent… information. 368 00:18:57,973 --> 00:18:59,558 So let's not forget that-- We make things up. 369 00:18:59,641 --> 00:19:02,143 - We just make things up here. - Again, we're just making things up. 370 00:19:02,227 --> 00:19:03,311 You bet we do. 371 00:19:03,395 --> 00:19:04,729 CNBC. 372 00:19:06,982 --> 00:19:08,149 Ta-da! 373 00:19:08,233 --> 00:19:10,569 [audience cheering, applauding] 374 00:19:11,861 --> 00:19:14,072 [researcher] Apes are amateur investors. 375 00:19:14,155 --> 00:19:17,659 They came out of this Reddit group called WallStreetBets. 376 00:19:17,742 --> 00:19:19,035 And they were just 377 00:19:19,119 --> 00:19:22,163 exchanging stock ideas, like, finance ideas. 378 00:19:22,247 --> 00:19:25,166 And then they decided to go into GameStop. 379 00:19:25,250 --> 00:19:26,793 [Brinda] "All people equal." 380 00:19:26,877 --> 00:19:29,504 That's what I read somewhere. Is that true? 381 00:19:29,588 --> 00:19:32,173 - [Deniz] Yes. - They saw that there was a hedge fund 382 00:19:32,257 --> 00:19:37,012 that was shorting the stock at a higher percentage 383 00:19:37,095 --> 00:19:39,055 than there was of the stock. 384 00:19:39,139 --> 00:19:41,850 They were like the Scooby-Doo kids in a van. 385 00:19:41,933 --> 00:19:43,518 And the van was Reddit. 386 00:19:43,602 --> 00:19:45,645 [imitating Scooby voice] And the scooby snack... 387 00:19:45,729 --> 00:19:49,816 - [Chelsea] ...was still weed. [chuckles] - [producers laughing] 388 00:19:49,900 --> 00:19:51,943 [audience laughing and applauding] 389 00:19:52,027 --> 00:19:55,280 Welcome back. The stock market in this country is treated basically as 390 00:19:55,363 --> 00:19:57,032 one of the vital signs of our economy. 391 00:19:57,115 --> 00:19:58,325 We're always checking it. 392 00:19:58,408 --> 00:20:00,952 But the stock market is not our economy. 393 00:20:01,036 --> 00:20:02,329 It's more like a casino. 394 00:20:02,412 --> 00:20:05,206 The only real difference between the stock market and a casino is 395 00:20:05,290 --> 00:20:08,084 a casino is well-regulated. 396 00:20:08,168 --> 00:20:09,336 [audience chuckles] 397 00:20:09,419 --> 00:20:11,379 And they kick out cheaters. 398 00:20:12,589 --> 00:20:15,592 To discuss this more, and how it affects you at home, 399 00:20:15,675 --> 00:20:19,262 we've got J. Brown, a self-taught retail investor 400 00:20:19,346 --> 00:20:22,682 who identifies as a member of the online ape movement of investors. 401 00:20:22,766 --> 00:20:25,477 Dave Lauer, a market structure consultant 402 00:20:25,560 --> 00:20:28,480 and former quantitative analyst at Citadel. 403 00:20:28,563 --> 00:20:31,316 He is currently the CEO of Urvin Finance. 404 00:20:31,399 --> 00:20:34,903 Danny Moses. He's an investor and former Wall Street trader, 405 00:20:34,986 --> 00:20:36,821 cohost of finance podcast On The Tape, 406 00:20:36,905 --> 00:20:38,949 and was profiled in the movie The Big Short. 407 00:20:39,032 --> 00:20:41,618 And Matt Kohrs, an investor and YouTube host 408 00:20:41,701 --> 00:20:45,205 who has been called a leading voice in the ape movement. 409 00:20:45,288 --> 00:20:47,207 Thank you, guys, very much for joining us. 410 00:20:47,290 --> 00:20:48,625 [audience applauding] 411 00:20:48,708 --> 00:20:51,211 So, you know, we talked about 412 00:20:51,294 --> 00:20:55,674 all these, uh, uh, different kind of complex financial instruments 413 00:20:55,757 --> 00:20:58,552 that go on in the stock market and the complexities of it. 414 00:20:58,635 --> 00:21:01,137 But it took the online movement, 415 00:21:02,138 --> 00:21:05,225 Redditors and retail investors, 416 00:21:05,976 --> 00:21:12,566 to uncover that GameStop was being shorted at 140% of its value 417 00:21:12,649 --> 00:21:14,526 and that if you all got together-- 418 00:21:14,609 --> 00:21:17,237 How in God's name did this happen? 419 00:21:17,320 --> 00:21:18,989 I guess the best way I can explain it is 420 00:21:19,072 --> 00:21:21,533 - that people had a chance to reset… - [Stewart] Mm-hmm. 421 00:21:21,616 --> 00:21:22,617 …during the pandemic. 422 00:21:22,701 --> 00:21:25,745 People had a chance to start thinking of different ways to make money, 423 00:21:25,829 --> 00:21:27,581 different ways to survive. 424 00:21:27,664 --> 00:21:29,833 And in moments of great struggle, 425 00:21:29,916 --> 00:21:32,002 people usually band together to protect each other. 426 00:21:32,085 --> 00:21:35,171 - [Stewart] Mm-hmm. - It gave rise to all these guys... 427 00:21:35,255 --> 00:21:36,673 ...sharing this information. 428 00:21:36,756 --> 00:21:40,927 Now, how did you learn to trust each other in this scenario? 429 00:21:41,011 --> 00:21:44,139 I think it's one of those things where we were all in the exact same boat. 430 00:21:44,222 --> 00:21:48,143 So there we were during the pandemic. A lot of us just downloaded Robinhood. 431 00:21:48,226 --> 00:21:49,895 We're sitting on our couch, hearing about it. 432 00:21:49,978 --> 00:21:51,438 Maybe we could make some money. 433 00:21:51,521 --> 00:21:53,940 And a community was built around it. 434 00:21:54,024 --> 00:21:56,610 And at first you're just talking about GameStop, 435 00:21:56,693 --> 00:21:58,486 a company that sells video games, 436 00:21:58,570 --> 00:21:59,863 something weird going on, 437 00:21:59,946 --> 00:22:01,364 leading to this exact moment 438 00:22:01,448 --> 00:22:04,159 when we're talking about some of the serious issues, 439 00:22:04,242 --> 00:22:06,786 manipulation and the fragility of the overall system? 440 00:22:06,870 --> 00:22:09,080 - [Stewart] Right. - It's-- It's absolutely wild. 441 00:22:09,164 --> 00:22:14,753 I think it was amazing to see this self-organized movement 442 00:22:14,836 --> 00:22:17,505 come together and uncover something 443 00:22:17,589 --> 00:22:19,925 and push the market to the breaking point. 444 00:22:20,008 --> 00:22:22,260 Because markets have become more fragile. 445 00:22:22,344 --> 00:22:24,221 All of this complexity 446 00:22:24,304 --> 00:22:27,933 between the derivatives and, you know, 15 stock exchanges 447 00:22:28,016 --> 00:22:30,644 and 40 dark pools and all these internalizers 448 00:22:30,727 --> 00:22:33,104 is an extremely complex system. 449 00:22:33,188 --> 00:22:35,440 And the complexity leads to fragility. 450 00:22:35,523 --> 00:22:36,900 And that's what these guys showed. 451 00:22:36,983 --> 00:22:40,028 They came at it. They found the hole, and they came at it. 452 00:22:40,111 --> 00:22:43,782 And they exposed that fragility, and the markets nearly fell apart. 453 00:22:44,407 --> 00:22:46,076 It's insane to think 454 00:22:46,159 --> 00:22:49,204 that a video game store almost broke the market. 455 00:22:49,287 --> 00:22:51,873 A video game store that sells hard copies… 456 00:22:51,957 --> 00:22:53,833 - [Lauer] Yes. - …of something that's d-- 457 00:22:53,917 --> 00:22:57,754 It'd be like if Blockbuster had come back, 458 00:22:57,837 --> 00:23:00,966 and everybody's like, "This Blockbuster's going through the roof." 459 00:23:01,633 --> 00:23:07,472 So how is it legal that they can hold a larger share 460 00:23:07,556 --> 00:23:10,308 in shorting a stock, in betting that it will go down, 461 00:23:11,476 --> 00:23:14,187 larger than the actual company is worth? 462 00:23:14,271 --> 00:23:15,438 You really can't do it, 463 00:23:15,522 --> 00:23:17,190 except market makers get an exemption 464 00:23:17,274 --> 00:23:20,110 to provide "liquidity." That's what they're doing to short stocks. 465 00:23:20,193 --> 00:23:22,445 You can have a situation where, for a period of time, 466 00:23:22,529 --> 00:23:25,156 there can be more shares short than are outstanding, potentially, 467 00:23:25,240 --> 00:23:27,450 - or "overborrowing," as they say. - Mm-hmm. 468 00:23:27,534 --> 00:23:29,077 You have to make that right over time, 469 00:23:29,160 --> 00:23:31,329 but there are periods, days, until a trade settles, 470 00:23:31,413 --> 00:23:33,039 where you don't know the bar wasn't secure. 471 00:23:33,123 --> 00:23:35,375 I don't want to go in too much detail. It's technical. 472 00:23:35,458 --> 00:23:37,711 Here's why you shouldn't go into too much detail. 473 00:23:37,794 --> 00:23:40,130 I stopped listening to you a minute ago. 474 00:23:40,213 --> 00:23:42,591 [audience, panelists laugh] 475 00:23:42,674 --> 00:23:43,675 Fair enough. 476 00:23:43,758 --> 00:23:45,176 But isn't that part of this? 477 00:23:45,260 --> 00:23:48,513 Isn't what's part of this is the complexity of it? 478 00:23:48,597 --> 00:23:51,516 What it sounds like is they set up structures on the market, 479 00:23:52,142 --> 00:23:56,104 and then the insiders exploit those systems. 480 00:23:56,187 --> 00:23:59,524 Oh, yeah. The complexity is purposeful. 481 00:23:59,608 --> 00:24:02,611 You know, they could have set up rules and regulations 482 00:24:02,694 --> 00:24:05,488 that would have simplified markets dramatically. 483 00:24:05,572 --> 00:24:08,408 But they specifically elected not to go down that path. 484 00:24:08,491 --> 00:24:11,453 They built complexity on complexity on complexity. 485 00:24:11,536 --> 00:24:14,414 And what happens with an extremely complex system is 486 00:24:14,497 --> 00:24:17,459 that it leads naturally to this level of inequality 487 00:24:17,542 --> 00:24:19,085 and this level of exploitation, 488 00:24:19,169 --> 00:24:24,174 because a few firms who are big enough can take advantage of that complexity. 489 00:24:24,257 --> 00:24:27,219 But it doesn't mean it makes any sense. That's part of the problem. 490 00:24:27,302 --> 00:24:29,262 You can't explain to a rational person 491 00:24:29,346 --> 00:24:32,307 how you can have more than the entire float of a company short. 492 00:24:32,390 --> 00:24:34,559 And so I think the retail community saw this, 493 00:24:34,643 --> 00:24:39,481 and they saw an opening to potentially attack the existing system, 494 00:24:39,564 --> 00:24:40,690 and they were right. 495 00:24:40,774 --> 00:24:42,734 Look, I don't understand the markets so well. 496 00:24:42,817 --> 00:24:44,986 But I play craps. 497 00:24:45,070 --> 00:24:47,614 So I understand what gambling is, you know? 498 00:24:47,697 --> 00:24:50,242 And all this being talked about, when I talk to guys on it, 499 00:24:50,325 --> 00:24:53,119 they roll their eyes at me like, "You just don't understand. 500 00:24:53,203 --> 00:24:57,249 Shorting is important to hedge a bet and hedge risk and do all these things." 501 00:24:57,332 --> 00:25:00,293 And I'm like, "No, no, no. You bet the pass line and then the come line. 502 00:25:00,377 --> 00:25:02,379 And then you tried to offset your bet. 503 00:25:02,462 --> 00:25:04,339 I get it. But it's gambling. 504 00:25:04,422 --> 00:25:08,969 And don't try and tell me that Robinhood isn't fucking FanDuel, 'cause it is. 505 00:25:09,052 --> 00:25:11,221 - [Brown laughing] - [audience laughing, applauding] 506 00:25:11,304 --> 00:25:13,890 That's-- That's-- It has to be. 507 00:25:15,141 --> 00:25:17,519 - Jon, if I could make a comment. - Yes, please. 508 00:25:17,602 --> 00:25:19,896 Gamification of the markets, which I think you're referring to-- 509 00:25:19,980 --> 00:25:24,067 People are treating a Robinhood account, a Coinbase account, you know, 510 00:25:24,150 --> 00:25:26,111 and a DraftKings account as the same. 511 00:25:26,194 --> 00:25:29,531 They're betting on Seattle, taking that money and buying crypto and-- 512 00:25:29,614 --> 00:25:33,201 I think that's one of the problems here, the access to trade on Robinhood. 513 00:25:33,285 --> 00:25:36,413 I think it sucked in a lot of people that think that way. 514 00:25:36,496 --> 00:25:39,374 These stocks are not trading on fundamentals, AMC and GameStop. 515 00:25:39,457 --> 00:25:41,376 But, Danny, what I would say to you is 516 00:25:42,210 --> 00:25:47,674 it's not the retail investor that really takes advantage of the gamification. 517 00:25:47,757 --> 00:25:49,509 It's the hedge fund investors. 518 00:25:49,593 --> 00:25:55,849 It feels like the pushback is because the retail guys got wise 519 00:25:55,932 --> 00:25:59,060 to what the game was in the back of the casino. 520 00:25:59,144 --> 00:26:01,479 It's all about inducements and incentives. 521 00:26:01,563 --> 00:26:03,440 And that's what we're seeing here, right? 522 00:26:03,523 --> 00:26:08,445 Because Robinhood is not incentivized for its customers to do well. 523 00:26:08,528 --> 00:26:11,740 It's incentivized for them to trade a lot. And-- [stammers] 524 00:26:11,823 --> 00:26:14,743 You're saying volume and volatility makes them more money? 525 00:26:14,826 --> 00:26:18,204 Exactly, and that's what makes Citadel and Virtu more money, and the wholesalers. 526 00:26:18,288 --> 00:26:21,291 So it's not a free market. The only reason there's this much churn is 527 00:26:21,374 --> 00:26:24,252 the Federal Reserve has hyperinflated the stock market 528 00:26:24,336 --> 00:26:27,839 by making it impossible for people to have savings accounts. 529 00:26:27,923 --> 00:26:30,550 - Yes. Inducements and incentives. - Oh, okay. 530 00:26:30,634 --> 00:26:31,635 [audience laughing] 531 00:26:31,718 --> 00:26:33,678 I-- You know what I just realized? 532 00:26:33,762 --> 00:26:36,890 I should have known what inducements and incentives mean! 533 00:26:36,973 --> 00:26:38,350 [audience laughing] 534 00:26:38,433 --> 00:26:40,685 My wife will tell you I watch CNN, Fox Business. 535 00:26:40,769 --> 00:26:43,730 I just watch all this stuff. I'm watching all of these things happen. 536 00:26:43,813 --> 00:26:46,483 And I just started just absorbing it. 537 00:26:46,566 --> 00:26:49,361 - And then I found a community on Twitter. - Mm-hmm. 538 00:26:49,444 --> 00:26:53,198 And I'm like, "Hold up. These are a bunch of people that get it." 539 00:26:53,823 --> 00:26:57,911 And it's not necessarily getting together to, you know, "collude" or anything. 540 00:26:57,994 --> 00:27:01,706 We're just sharing, learning and connecting with each other. 541 00:27:02,290 --> 00:27:03,833 To share information. 542 00:27:03,917 --> 00:27:09,339 Is information the most valuable part of this new movement and this connection? 543 00:27:09,422 --> 00:27:11,675 And has it really not democratized the stock market? 544 00:27:11,758 --> 00:27:13,718 It's democratized information 545 00:27:13,802 --> 00:27:17,722 that allows you to go to battle with these larger firms? 546 00:27:17,806 --> 00:27:19,558 I definitely think it's the information, 547 00:27:19,641 --> 00:27:22,602 and that's kind of one of the crazy things is there's a lack of it. 548 00:27:22,686 --> 00:27:23,937 It's very difficult. 549 00:27:24,020 --> 00:27:26,189 Um, at first you look into the market, 550 00:27:26,273 --> 00:27:28,567 and it's very much, "Is the stock going up or down?" 551 00:27:28,650 --> 00:27:30,694 And then you dive into it a little bit more, 552 00:27:30,777 --> 00:27:32,654 and you find additional things out. 553 00:27:32,737 --> 00:27:35,991 Like, "Okay, how could short interest get that high? How is that possible?" 554 00:27:36,074 --> 00:27:37,951 And it's purposely complex. 555 00:27:38,034 --> 00:27:39,953 I don't think we're supposed to understand it, 556 00:27:40,036 --> 00:27:42,163 and then you start to ask legitimate questions. 557 00:27:42,247 --> 00:27:45,166 It's very much perceived that we're a monolith of people 558 00:27:45,250 --> 00:27:47,085 who don't know what we're talking about 559 00:27:47,168 --> 00:27:49,337 when I feel that we're asking very legitimate questions. 560 00:27:49,421 --> 00:27:54,843 Jon, people in the professional investment community have been upset 561 00:27:54,926 --> 00:27:58,138 about payment for order flow and these market makers for years. 562 00:27:58,221 --> 00:28:02,267 And I'm glad you guys are starting to see what it really is in the underbelly. 563 00:28:02,350 --> 00:28:03,393 But let me just say something. 564 00:28:03,476 --> 00:28:05,228 Stocks trade on fundamentals in the long term. 565 00:28:05,312 --> 00:28:07,272 They can do whatever they want in the short term. 566 00:28:07,355 --> 00:28:09,149 - Right. - So, short sellers get vilified, 567 00:28:09,232 --> 00:28:11,610 but short sellers can be a source of great information 568 00:28:11,693 --> 00:28:14,446 the same way that retail and long buyers can be. 569 00:28:14,529 --> 00:28:15,363 [Stewart] Right. 570 00:28:15,447 --> 00:28:18,825 So I think, to get everyone in a room and talking about that is very constructive. 571 00:28:18,909 --> 00:28:20,368 But I think fundamentals matter. 572 00:28:20,452 --> 00:28:22,120 And I just think it's key to understand that. 573 00:28:22,203 --> 00:28:24,331 That's one of the things when I say about the connection. 574 00:28:24,414 --> 00:28:28,043 I want to bridge and try to help others. And Matt does it all the time too. 575 00:28:28,126 --> 00:28:30,545 We all want to have these conversations, 576 00:28:30,629 --> 00:28:34,507 but the thing about it is, we need to have answers to certain things. 577 00:28:34,591 --> 00:28:37,344 I need to know why, in January, when this was running up, 578 00:28:37,427 --> 00:28:40,305 the "buy" button was taken away in the midst of a run-up. 579 00:28:40,388 --> 00:28:42,265 That's never happened. And because-- 580 00:28:42,349 --> 00:28:45,727 - And the "sell" button still worked. - Yeah, the regular people like me, 581 00:28:45,810 --> 00:28:50,440 who finally have a chance, the waitress, the meter maid, whoever-- the janitor. 582 00:28:50,523 --> 00:28:52,567 Tell me that answer, 583 00:28:52,651 --> 00:28:54,653 and then we can have the larger conversation. 584 00:28:54,736 --> 00:28:57,030 Because right now that's all we see 585 00:28:57,113 --> 00:28:59,449 is that every time we get ready to get ahead, 586 00:28:59,532 --> 00:29:00,742 you take it from us. 587 00:29:00,825 --> 00:29:04,329 And once you take it, we're supposed to just take your word for it and accept it. 588 00:29:04,412 --> 00:29:07,165 I've learned fundamentals. I've learned price discovery. 589 00:29:07,249 --> 00:29:09,125 We can preach fundamentals all day. 590 00:29:09,209 --> 00:29:12,462 Knowledge is wonderful, 591 00:29:12,546 --> 00:29:17,217 but a Wharton business degree and a life living, 592 00:29:17,300 --> 00:29:19,135 they collide in this movement. 593 00:29:19,219 --> 00:29:21,596 People are learning where their money is going. 594 00:29:21,680 --> 00:29:23,974 You spent all day cooking the Thanksgiving dinner. 595 00:29:24,057 --> 00:29:25,934 You mean to tell me you want to watch everybody eat? 596 00:29:26,017 --> 00:29:28,353 No. Damn that. I want to eat too. 597 00:29:28,436 --> 00:29:31,690 - That's where we're at. - Do people normally want to hug you? 598 00:29:31,773 --> 00:29:32,816 [Brown, audience laughing] 599 00:29:32,899 --> 00:29:36,820 - [audience applauding] - [Stewart] That was beautifully spoken. 600 00:29:36,903 --> 00:29:40,574 We're gonna take a quick break, and then we're gonna straighten it out. 601 00:29:40,657 --> 00:29:45,036 'Cause there's solutions that are on the table here that can be done, 602 00:29:45,120 --> 00:29:46,997 and these guys will help figure it out. 603 00:29:47,080 --> 00:29:49,708 [audience applauding] 604 00:30:02,971 --> 00:30:04,890 [librarian] Throughout my 30-year career, 605 00:30:04,973 --> 00:30:08,685 I would tell myself, "It's okay. I'm going to be secure when I retire. 606 00:30:08,768 --> 00:30:12,522 I will have this pension until the day I die." 607 00:30:12,606 --> 00:30:17,986 And so, it's-- it's a kick in the teeth to have them go back on that. 608 00:30:18,069 --> 00:30:22,574 I've already lost, since 2011, over 30,000. 609 00:30:22,657 --> 00:30:25,368 Everybody, all retirees, lost that money. 610 00:30:25,452 --> 00:30:29,748 I was stunned, and then I was angry, and then I just started worrying. 611 00:30:29,831 --> 00:30:32,000 It's a mixture of anger, despair… 612 00:30:32,083 --> 00:30:35,921 We've had over 30,000 teachers in Ohio… 613 00:30:36,004 --> 00:30:37,714 that retired and have died 614 00:30:37,797 --> 00:30:41,718 without receiving the benefits they were promised. 615 00:30:41,801 --> 00:30:43,011 Wall Street doesn't care. 616 00:30:43,094 --> 00:30:49,100 So if our pension fund goes belly-up, it doesn't matter. 617 00:30:49,184 --> 00:30:51,144 They're good with that 618 00:30:51,228 --> 00:30:52,687 because they got it all. 619 00:30:52,771 --> 00:30:55,941 Benefits to workers that have been promised are being slashed 620 00:30:56,024 --> 00:30:58,443 in order to pay Wall Street more. 621 00:30:58,526 --> 00:31:00,820 Three percent cut from workers 622 00:31:00,904 --> 00:31:04,366 to pay Wall Street 4% or 5% in additional fees. 623 00:31:12,791 --> 00:31:14,292 [audience applauding] 624 00:31:15,669 --> 00:31:17,045 We're talking about, uh, 625 00:31:17,128 --> 00:31:20,966 the health of what many wrongfully consider the lifeblood of our economy, 626 00:31:21,049 --> 00:31:22,050 the stock market. 627 00:31:22,133 --> 00:31:25,470 We're gonna talk about what a healthier and simpler marketplace could look like. 628 00:31:25,554 --> 00:31:30,225 But it brings up-- Here's this other sort of unforeseen circumstance. 629 00:31:30,308 --> 00:31:34,187 All these public union pension funds with billions of dollars 630 00:31:34,271 --> 00:31:37,315 have to hire hedge fund money managers. 631 00:31:37,399 --> 00:31:40,986 And if it goes in the tank, they still walk away with those fees. 632 00:31:41,069 --> 00:31:44,322 Again, transparency, fundamentals. 633 00:31:44,406 --> 00:31:48,285 Why doesn't it apply to these hedge fund operators? 634 00:31:48,368 --> 00:31:52,998 It's being nickel-and-dimed at every point in this very complex set of pipes-- 635 00:31:53,081 --> 00:31:57,627 And then at the end, when that underfunded pension plan has underperformed 636 00:31:57,711 --> 00:32:00,171 and it's time for someone to collect their benefits, 637 00:32:00,255 --> 00:32:01,631 there's not gonna be enough money. 638 00:32:01,715 --> 00:32:02,716 And it's a huge problem. 639 00:32:02,799 --> 00:32:04,426 And then the taxpayers are gonna have to step in. 640 00:32:04,509 --> 00:32:07,929 So that's where market-structure issues and complexity intersect 641 00:32:08,013 --> 00:32:10,724 with both shareholders and retirees and taxpayers. 642 00:32:10,807 --> 00:32:12,934 And that's why everybody should care about these issues. 643 00:32:13,018 --> 00:32:17,606 Who is on the side of the retail investor and those people? 644 00:32:17,689 --> 00:32:20,108 You look at-- It's the regulators, the SEC, 645 00:32:20,191 --> 00:32:21,526 but they're outgunned. 646 00:32:21,610 --> 00:32:23,820 And if you could talk to the head of the SEC-- 647 00:32:23,904 --> 00:32:25,280 What would you say to him? 648 00:32:25,363 --> 00:32:30,368 People might not realize that many of the regulatory structures in the market 649 00:32:30,452 --> 00:32:32,162 are self-regulatory. 650 00:32:32,954 --> 00:32:34,164 Okay? So you have-- 651 00:32:34,247 --> 00:32:36,291 Self-regulatory meaning, "You guys handle this"? 652 00:32:36,374 --> 00:32:38,293 - [Lauer] Yes. - [Moses] Like baseball arbitration. 653 00:32:38,376 --> 00:32:44,007 Yes. So, the stock exchanges, for example, are for-profit, publicly traded companies 654 00:32:44,090 --> 00:32:47,761 who set the rules for both their exchanges and the market overall, 655 00:32:47,844 --> 00:32:48,970 and then they're the ones... 656 00:32:49,054 --> 00:32:51,097 - What? - ...charged with enforcing them. 657 00:32:51,181 --> 00:32:53,892 There's no real accountability. 658 00:32:53,975 --> 00:32:57,020 It's all self-regulation and access, 659 00:32:57,103 --> 00:32:59,272 because the money that these companies make-- 660 00:32:59,356 --> 00:33:04,277 Man, if that guy's got a $150 million house in London, 661 00:33:04,361 --> 00:33:06,738 I think, "How much money is he spending in Washington?" 662 00:33:06,821 --> 00:33:07,906 - [Lauer] Mm-hmm. - [Moses] Yeah. 663 00:33:08,615 --> 00:33:11,117 - Do you know what I mean? - Yeah. We call it the Acela economy. 664 00:33:11,201 --> 00:33:13,119 We used to say "the merger of Wall Street and K Street." 665 00:33:13,203 --> 00:33:16,414 So much goes on behind the scenes between Washington and New York City. 666 00:33:16,498 --> 00:33:18,792 That's where they used to run and write the rules on the lobbyists 667 00:33:18,875 --> 00:33:20,502 and even the Wall Street rules that exist. 668 00:33:20,585 --> 00:33:26,216 It's not politically viable anymore not to hyperinflate the stock market. 669 00:33:26,299 --> 00:33:30,971 If that's the thing that everybody sees on their screen at night on the news, 670 00:33:31,763 --> 00:33:37,435 if that thing goes down, it puts lawmakers in political peril. 671 00:33:38,228 --> 00:33:40,647 And so they won't take any steps 672 00:33:40,730 --> 00:33:43,942 that may bring it more into a fundamentals market. 673 00:33:44,025 --> 00:33:48,029 Listen. It's been this moral hazard for a long time on Wall Street. 674 00:33:48,113 --> 00:33:51,157 No one went to jail, really, after the Big Short, after the financial crisis. 675 00:33:51,241 --> 00:33:52,284 Couple people here and there, 676 00:33:52,367 --> 00:33:55,620 but everybody just paid their fines and moved on. It's the culture of it. 677 00:33:55,704 --> 00:33:57,956 The fines are paid by the shareholders of the company themselves, 678 00:33:58,039 --> 00:33:59,541 and no one's held accountable for it. 679 00:33:59,624 --> 00:34:02,544 It's really become an upsetting part of Wall Street. 680 00:34:02,627 --> 00:34:06,965 We live in a system where it's easier to paint retail as the bad people 681 00:34:07,048 --> 00:34:11,887 opposed to people stepping up and addressing politicians insider trading. 682 00:34:11,970 --> 00:34:14,597 We have Federal Reserve members insider trading. 683 00:34:14,681 --> 00:34:15,807 Self-regulation. 684 00:34:15,891 --> 00:34:18,768 When, in reality, we're trying to address very serious things. 685 00:34:18,852 --> 00:34:22,521 I want to get a take on where you guys would go 686 00:34:22,606 --> 00:34:26,318 that would make this function in a way that made a little bit more sense. 687 00:34:26,401 --> 00:34:28,528 - I got three. - [Stewart] Okay. Let's hear 'em. 688 00:34:28,612 --> 00:34:31,155 Number one, all politicians make minimum wage. 689 00:34:31,239 --> 00:34:32,657 [audience cheering, applauding] 690 00:34:36,077 --> 00:34:37,077 [clears throat] 691 00:34:38,038 --> 00:34:39,789 [Brown] Yeah, write that down. 692 00:34:41,458 --> 00:34:44,001 Boy, would that get raised quickly. 693 00:34:44,085 --> 00:34:45,086 Yeah. Yeah. 694 00:34:45,170 --> 00:34:46,838 No super PACs and no donations 695 00:34:46,922 --> 00:34:50,550 because what it is, is that we don't have the ability as regular people 696 00:34:50,634 --> 00:34:52,635 to have someone go and speak for us 697 00:34:52,719 --> 00:34:55,012 - unless we have the type of power… - [Stewart] Access. 698 00:34:55,096 --> 00:34:56,472 …as a community. 699 00:34:56,556 --> 00:34:59,476 Secondly, the transparency that they talk about. 700 00:34:59,559 --> 00:35:03,730 How is it that a particular ticker can trade at 67% in the dark pool 701 00:35:03,813 --> 00:35:05,148 and we not know what's going on, 702 00:35:05,232 --> 00:35:09,486 as I know myself and others are actually buying that stock in droves, 703 00:35:09,569 --> 00:35:11,571 - and we don't see the buying pressure? - [Stewart] Mm-hmm. 704 00:35:11,655 --> 00:35:14,491 So more transparency is definitely needed. 705 00:35:14,574 --> 00:35:17,244 And the third one, and the most important one, 706 00:35:17,327 --> 00:35:22,082 is that we allow ourselves to connect to all voices involved… 707 00:35:22,165 --> 00:35:25,418 - [Stewart] Mm-hmm. - …so that we don't just scream at the wall 708 00:35:25,502 --> 00:35:26,795 and nobody hears us. 709 00:35:26,878 --> 00:35:29,798 We have to organically connect 710 00:35:29,881 --> 00:35:33,134 to understand that every decision we make affects everybody, 711 00:35:33,218 --> 00:35:35,887 including the person that gives you an extra pack of ketchup at McDonald's. 712 00:35:35,971 --> 00:35:36,805 Right. 713 00:35:36,888 --> 00:35:39,307 Final word on the things you'd like to see. 714 00:35:39,391 --> 00:35:43,103 Yeah. Overall, the highest-level thing is market transparency and fairness. 715 00:35:43,186 --> 00:35:46,106 I think it very much starts with the extreme amount of off-exchange trading. 716 00:35:46,189 --> 00:35:48,066 I think we're bringing up very serious things 717 00:35:48,149 --> 00:35:50,026 that should not be swept under the rug, 718 00:35:50,110 --> 00:35:53,989 because I think our market was at a serious risk, 719 00:35:54,072 --> 00:35:57,117 and it needs to be fixed so it doesn't happen in the future. 720 00:35:57,200 --> 00:36:00,996 The biggest things that I would do is I would get rid of unnecessary complexity, 721 00:36:01,079 --> 00:36:03,748 and I would get rid of these incentives and inducements. 722 00:36:03,832 --> 00:36:05,041 Who would get rid of that though? 723 00:36:05,125 --> 00:36:07,961 - You need the regulator to step up. - [Stewart] The SEC would have to this. 724 00:36:08,044 --> 00:36:11,339 The SEC has to step in, and Congress would have to support it. 725 00:36:11,423 --> 00:36:13,425 But right now, the SEC could step in, 726 00:36:13,508 --> 00:36:16,803 and it could peel away these layers of regulation 727 00:36:16,887 --> 00:36:18,555 and simplify markets. 728 00:36:18,638 --> 00:36:20,724 I think we'd have a much better outcome. 729 00:36:20,807 --> 00:36:24,728 Danny, do you have anything solutionary that you would like to throw out there? 730 00:36:24,811 --> 00:36:27,105 Retail investors, people can do a lot in that regard, 731 00:36:27,188 --> 00:36:28,982 these changes that you want to invoke. 732 00:36:29,065 --> 00:36:30,358 They can go to a company and say, 733 00:36:30,442 --> 00:36:33,111 "We're not gonna buy your shares if you trade on that exchange," 734 00:36:33,194 --> 00:36:35,405 or, "We're not gonna do so-and-so." You can invoke change. 735 00:36:35,488 --> 00:36:37,574 It'll be hard. It'll take time. But there's been movement-- 736 00:36:37,657 --> 00:36:39,743 - [Stewart] Grassroots power. - Grassroots power going on. 737 00:36:39,826 --> 00:36:41,077 So maybe you can invoke some change. 738 00:36:41,161 --> 00:36:43,288 I think this movement is a differentiator. 739 00:36:43,371 --> 00:36:46,082 You know, we've been having this market structure conversation for years, 740 00:36:46,166 --> 00:36:49,085 and the involvement of the retail investor and people caring, 741 00:36:49,169 --> 00:36:50,629 millions of people caring, 742 00:36:50,712 --> 00:36:53,173 is something that has never happened before 743 00:36:53,256 --> 00:36:58,178 in this, like, extremely detailed part of politics and regulation. 744 00:36:58,261 --> 00:37:00,138 And I think that that can make a big difference. 745 00:37:00,222 --> 00:37:03,058 And so I hope that it will show regulators 746 00:37:03,141 --> 00:37:05,435 that this is something they need to address. 747 00:37:05,518 --> 00:37:07,646 Well, it's terrific. I can't thank you guys enough. 748 00:37:07,729 --> 00:37:10,065 - Thank you for being here. - [audience applauding] 749 00:37:10,148 --> 00:37:12,943 To my distinguished panel. 750 00:37:13,443 --> 00:37:15,362 J., Dave, Danny, Matt. 751 00:37:16,529 --> 00:37:18,657 - We'll be right back. - [audience cheering] 752 00:37:25,997 --> 00:37:30,919 You are the, uh, commissioner, the head commissioner, the chair. 753 00:37:31,002 --> 00:37:34,923 The SEC began as a way to get investors 754 00:37:35,006 --> 00:37:38,009 to have confidence in the stock market. 755 00:37:38,093 --> 00:37:40,929 That markets won't necessarily self-regulate. 756 00:37:41,012 --> 00:37:44,266 This idea of a free and fair marketplace 757 00:37:44,349 --> 00:37:50,480 can be exploited by those where greed might be more of a motivating factor. 758 00:37:50,564 --> 00:37:51,856 Look, it comes down to this. 759 00:37:51,940 --> 00:37:55,110 - We want to achieve things as society. - [Stewart] Mm-hmm. 760 00:37:55,193 --> 00:37:59,155 To make it fair, and also to lower the cost. 761 00:37:59,239 --> 00:38:02,534 - Mm-hmm. - The SEC has three parts in our mission. 762 00:38:02,617 --> 00:38:08,790 Investor protection, facilitating capital formation, raising money. 763 00:38:08,873 --> 00:38:10,834 - [Stewart] Mm-hmm. - And then, that which is in the middle, 764 00:38:10,917 --> 00:38:14,129 the markets, we call it fair, orderly and efficient markets. 765 00:38:14,212 --> 00:38:15,922 - [Stewart] Right. - So it's those three. 766 00:38:16,006 --> 00:38:19,801 And if we do the middle right, if we make them fair. 767 00:38:19,885 --> 00:38:22,512 And efficient, meaning lower cost in the middle. 768 00:38:22,596 --> 00:38:23,430 Mm-hmm. 769 00:38:23,513 --> 00:38:27,350 Investors do better and companies raising money better. 770 00:38:27,434 --> 00:38:31,229 - And that also lowers the cost... - How are we doing with all that? 771 00:38:31,313 --> 00:38:32,439 ...to the companies raising money. 772 00:38:32,522 --> 00:38:35,191 It does raise the question. 773 00:38:35,775 --> 00:38:41,781 Are we creating confidence in the markets to really protect investors 774 00:38:42,407 --> 00:38:48,747 or to make sure that we do not interrupt capital formation 775 00:38:48,830 --> 00:38:50,040 to these businesses? 776 00:38:50,123 --> 00:38:54,794 Because if you look at the equality of that equation. 777 00:38:54,878 --> 00:38:58,632 Yeah. Which way-- Where we leaning more into. Is what-- 778 00:38:58,715 --> 00:38:59,799 Well, I think we know. 779 00:38:59,883 --> 00:39:02,969 84% of the equities market is owned by 10% of the people. 780 00:39:03,053 --> 00:39:05,222 No-- No-- Think of it as this. 781 00:39:05,305 --> 00:39:08,725 We're not gonna-- We're not gonna-- Nobody bats 1,000. 782 00:39:08,808 --> 00:39:10,769 - Mm-hmm. - But we're going to, every day, 783 00:39:10,852 --> 00:39:13,480 be thinking about those working families, those retirees, 784 00:39:13,563 --> 00:39:15,440 those early investors in the markets. 785 00:39:15,523 --> 00:39:19,486 But the retail investor... they're at a real disadvantage. 786 00:39:20,487 --> 00:39:21,655 And you're the sheriff. 787 00:39:24,074 --> 00:39:25,242 And you're outgunned. 788 00:39:25,325 --> 00:39:27,410 I walked into your coffee room today. 789 00:39:27,494 --> 00:39:30,372 There's a little sign that says "Coffee donations welcome." 790 00:39:31,831 --> 00:39:33,208 We're at the SEC. 791 00:39:33,291 --> 00:39:35,460 - Yeah. - Holy shit. 792 00:39:36,169 --> 00:39:38,838 Now we could use some more resources. That is for sure. 793 00:39:38,922 --> 00:39:42,425 There's 4,500 people that are full-time here. 794 00:39:42,509 --> 00:39:43,802 I wish it was more. 795 00:39:43,885 --> 00:39:47,347 We shrank in the prior administration 5%. 796 00:39:47,430 --> 00:39:49,307 - [Stewart] Right. - And this is in the time when 797 00:39:49,391 --> 00:39:51,309 markets were growing dramatically. 798 00:39:51,393 --> 00:39:53,603 And we should have, frankly, I believe, 799 00:39:53,687 --> 00:39:56,731 grown during the last five years instead of shrunk. 800 00:39:56,815 --> 00:39:59,401 How outmanned are you? 801 00:39:59,484 --> 00:40:02,612 Are you an abacus in a calculator world? 802 00:40:02,696 --> 00:40:04,656 Are you analog in a digital world? 803 00:40:04,739 --> 00:40:05,782 - Because-- - It's hard. 804 00:40:05,865 --> 00:40:06,866 - [Stewart] Yeah. - We spend-- 805 00:40:06,950 --> 00:40:09,244 We have about a two billion dollar-a-year budget here. 806 00:40:09,327 --> 00:40:13,873 We spend about 350 to 400 million a year on technology. 807 00:40:13,957 --> 00:40:19,921 Which is probably what one of the top five or six banks spend in a few weeks. 808 00:40:20,005 --> 00:40:21,798 - [Stewart] Right. - You know, on technology. 809 00:40:21,882 --> 00:40:26,219 I feel like the SEC is put in an impossible position. 810 00:40:27,178 --> 00:40:32,976 And that if we don't change the way that the SEC does business, 811 00:40:34,102 --> 00:40:38,189 investors are going to continue to receive the ass-kicking 812 00:40:38,273 --> 00:40:41,610 that they're getting right now from institutional investors 813 00:40:41,693 --> 00:40:45,947 who are generating overwhelming returns. 814 00:40:46,031 --> 00:40:50,160 And the agility of the markets to exploit things 815 00:40:50,243 --> 00:40:54,331 that are even foundational, has so far surpassed 816 00:40:54,414 --> 00:40:59,044 the ability of the police to come in and stop it. 817 00:40:59,127 --> 00:41:01,546 The challenge for an agency like ours, 818 00:41:01,630 --> 00:41:04,007 and Congress gives us a lot of authorities, 819 00:41:04,090 --> 00:41:10,388 to use them in policy and market oversight 820 00:41:10,472 --> 00:41:12,098 and, of course, enforcement. 821 00:41:12,182 --> 00:41:14,226 - Right. - A matter of setting priorities, 822 00:41:14,309 --> 00:41:19,189 a matter of moving a policy agenda with a five-member commission. 823 00:41:19,272 --> 00:41:21,024 - Yes. - Doing the economic analysis. 824 00:41:21,107 --> 00:41:23,652 Staying within the chalk lines of the law. 825 00:41:23,735 --> 00:41:25,362 And so, I mean-- 826 00:41:25,445 --> 00:41:31,326 Laws that are oftentimes written by the very people you're trying to regulate. 827 00:41:31,409 --> 00:41:33,245 No, they're written by Congress. 828 00:41:33,328 --> 00:41:36,581 Written by the very people you're trying to regulate. 829 00:41:36,665 --> 00:41:42,212 Because who do you think writes the laws for Congress on financial instruments? 830 00:41:42,879 --> 00:41:43,964 Realistically. 831 00:41:44,047 --> 00:41:45,423 - Congress-- - Knowing what you know. 832 00:41:45,507 --> 00:41:49,135 Congress and remarkable staff at congress. I've worked with a lot of them. 833 00:41:49,219 --> 00:41:51,596 So you've been in there a long time. 834 00:41:51,680 --> 00:41:54,808 You're telling me that financial institutions, 835 00:41:54,891 --> 00:41:57,352 large financial institutions, 836 00:41:57,435 --> 00:42:00,146 don't lobby Congress on the writing of those regulations. 837 00:42:00,230 --> 00:42:02,524 - Jon, they absolutely-- - So who-- 838 00:42:02,607 --> 00:42:05,193 - Well, that's what I'm asking you. - They lobby, they have… 839 00:42:05,277 --> 00:42:06,278 Of course. 840 00:42:06,361 --> 00:42:08,822 …an ability to get meetings-- Oh, absolutely. 841 00:42:08,905 --> 00:42:13,868 So the laws that Congress writes are manipulated and coerced-- 842 00:42:13,952 --> 00:42:16,162 - Those are your words. - [sighs] 843 00:42:17,122 --> 00:42:20,959 How are you gonna be-- I'm, like, talking to a sheriff, and I'm like, 844 00:42:21,042 --> 00:42:22,878 "The drug dealers are out there." And you're like, 845 00:42:22,961 --> 00:42:26,965 "Drug dealers? Now? Come on now. Let's not be unfair to them." 846 00:42:27,048 --> 00:42:28,717 - Jon, I-- - You're the cop. 847 00:42:28,800 --> 00:42:30,635 I understand that. I understand that. 848 00:42:30,719 --> 00:42:36,057 But you also want somebody in my role to be successful at being a cop. 849 00:42:36,141 --> 00:42:37,142 Oh, my Lord. 850 00:42:37,225 --> 00:42:40,312 So Congress writes the laws. We implement those laws. 851 00:42:40,395 --> 00:42:44,232 Yes. Congress, lobbied by financial institutions, writes the laws. 852 00:42:44,316 --> 00:42:46,693 I guess, ultimately, what it comes down to is this. 853 00:42:46,776 --> 00:42:50,614 Is the SEC the best system to do this? 854 00:42:50,697 --> 00:42:54,367 I think the American public kind of gets it. 855 00:42:54,451 --> 00:42:57,495 That the system is not fully working for them. 856 00:42:58,079 --> 00:43:01,249 - That's right. Okay. All right? - Oh, yes. I believe that's true. 857 00:43:01,333 --> 00:43:03,168 The apes exposed something really interesting. 858 00:43:03,251 --> 00:43:08,131 They crowdsourced a way of rooting out corruption. 859 00:43:08,215 --> 00:43:11,968 They found things in the system that didn't seem right. 860 00:43:12,052 --> 00:43:16,056 Like the information that they were getting was two weeks old. 861 00:43:16,139 --> 00:43:17,557 That they weren't being told 862 00:43:17,641 --> 00:43:23,813 that these 140% shorts totaled that 140%. 863 00:43:23,897 --> 00:43:27,359 They knew there was a short, but they didn't get that information until later, 864 00:43:27,442 --> 00:43:30,153 and they didn't get the information to the extent of it. 865 00:43:30,237 --> 00:43:32,197 And doesn't that show 866 00:43:32,280 --> 00:43:37,410 that disclosure and transparency are not functioning 867 00:43:37,494 --> 00:43:39,329 to the protection of investors? 868 00:43:39,412 --> 00:43:42,666 I'm not saying this is without its challenges. 869 00:43:42,749 --> 00:43:45,710 There are real challenges. There are real challenges. 870 00:43:45,794 --> 00:43:49,047 - Complexity helps them-- - Give me a better system. 871 00:43:49,130 --> 00:43:52,342 Give me a better system to do this than the one we have in place. 872 00:43:52,926 --> 00:43:54,970 'Cause the one we have is getting its butt kicked. 873 00:43:55,053 --> 00:43:58,807 I believe in this system. 874 00:43:58,890 --> 00:44:01,643 I believe in our American democracy. You're not gonna get me to say-- 875 00:44:01,726 --> 00:44:04,354 I'm not saying give me a different system than American democracy. 876 00:44:04,437 --> 00:44:05,272 Wait, listen-- 877 00:44:05,355 --> 00:44:10,360 Purely based on the financial system we have and the stock market, 878 00:44:10,443 --> 00:44:14,864 is there a better system than the SEC-- 879 00:44:14,948 --> 00:44:18,827 Is there something in this crowdsourcing 880 00:44:18,910 --> 00:44:22,122 that the apes brought to bear that can be useful-- 881 00:44:22,205 --> 00:44:27,294 Can there be a partnership between the SEC and a more crowdsourced-- 882 00:44:27,377 --> 00:44:31,047 Jon, I live within the system I'm in-- 883 00:44:31,131 --> 00:44:32,716 Dream, man. Dream! 884 00:44:32,799 --> 00:44:37,470 Yeah, I'll dream, but I also want to get things done. 885 00:44:37,554 --> 00:44:40,599 I want to get things done on behalf of the investing public. 886 00:44:40,682 --> 00:44:44,394 Have you thought about, outside of the bureaucracy, 887 00:44:45,729 --> 00:44:48,899 is there something that could help you be more agile? 888 00:44:48,982 --> 00:44:53,737 So I would say, and the compliment goes to Senator Grassley from Iowa. 889 00:44:53,820 --> 00:44:57,282 - He-- No-- Senator Grassley fought hard… - All right. Here we go. 890 00:44:57,365 --> 00:44:59,534 …on a decentralization point you're talking about. 891 00:44:59,618 --> 00:45:01,536 It's called the whistleblower law. 892 00:45:01,620 --> 00:45:06,333 So in the aftermath of the '08 crisis and that big reform law, Dodd-Frank, 893 00:45:06,416 --> 00:45:10,337 Senator Grassley fought hard that this agency and some other agencies 894 00:45:10,420 --> 00:45:13,798 stood up and put in place a whistleblower program. 895 00:45:13,882 --> 00:45:17,219 And over the ten or so years that this has stood up, 896 00:45:17,302 --> 00:45:19,930 we've given awards. 897 00:45:20,013 --> 00:45:23,266 - That's a crowdsourcing, decentralized-- - Right. Right. 898 00:45:23,350 --> 00:45:29,189 What do we need to do, and is the SEC not enough? You know? 899 00:45:29,272 --> 00:45:31,483 If you look at the past ten years, right? 900 00:45:31,566 --> 00:45:33,109 Or the past 20 years. 901 00:45:33,193 --> 00:45:38,531 The SEC very rarely will send something 902 00:45:38,615 --> 00:45:40,951 and recommend it to the DOJ for prosecution. 903 00:45:41,034 --> 00:45:43,912 - The 2008 financial crisis-- - That's not true. 904 00:45:43,995 --> 00:45:47,791 We bring about 700 enforcement-- 905 00:45:47,874 --> 00:45:52,420 750 enforcement cases a year, and I could give you the exact figures, 906 00:45:52,504 --> 00:45:57,092 but a whole chunk of those are also joint criminal investigations. 907 00:45:57,175 --> 00:45:59,302 You know, with all the financial shenanigans 908 00:45:59,386 --> 00:46:00,720 that have gone on over the years, 909 00:46:00,804 --> 00:46:04,432 the only person we've really brought to heel is Martha Stewart. 910 00:46:04,516 --> 00:46:08,728 And that's got to tell you something about just how tilted this thing is. 911 00:46:08,812 --> 00:46:11,398 You've forgotten a little bit about Bernie Madoff, but… 912 00:46:11,481 --> 00:46:15,026 Well, speaking of Bernie Madoff, who came up with payment for order flow? 913 00:46:15,110 --> 00:46:16,945 - Yeah, yeah. No, I understand. - Right. 914 00:46:17,028 --> 00:46:19,739 But he did serve his time in jail and everything. 915 00:46:19,823 --> 00:46:22,742 One guy and one woman. 916 00:46:22,826 --> 00:46:26,037 Generally, it seems like people don't go to jail for financial crimes. 917 00:46:26,121 --> 00:46:27,163 They pay fines. 918 00:46:27,247 --> 00:46:28,665 I think that's a fair statement. 919 00:46:28,748 --> 00:46:30,667 - That's fair. - Generally-- 920 00:46:30,750 --> 00:46:33,169 The Department of Justice has the criminal authorities… 921 00:46:33,253 --> 00:46:34,754 - Understood. - …we have the civil. 922 00:46:34,838 --> 00:46:36,923 That's right. And on the civil side, 923 00:46:37,424 --> 00:46:43,680 more than 50% of the fines levied from SEC judgments are not collected. 924 00:46:44,764 --> 00:46:48,727 There are less financial judgments that are levied now 925 00:46:48,810 --> 00:46:50,729 than there were 15 years ago. 926 00:46:51,354 --> 00:46:57,611 It doesn't seem like the SEC has the ability to keep up. 927 00:46:58,278 --> 00:47:02,616 Is there anything that you would think could bring more teeth to the SEC, 928 00:47:02,699 --> 00:47:03,992 in terms of accountability, 929 00:47:04,075 --> 00:47:06,620 that would be more of a stick? 930 00:47:06,703 --> 00:47:12,500 I think what we can do is bring important cases 931 00:47:12,584 --> 00:47:17,339 that are sort of high-profile cases that show people, "No. You're over the line." 932 00:47:17,422 --> 00:47:20,592 It could be accounting fraud. It could be insider trading. 933 00:47:20,675 --> 00:47:24,846 But is there something that would be more, uh, of a deterrent-- 934 00:47:24,930 --> 00:47:30,977 More of a deterrent is bars, where individual accountability-- 935 00:47:31,061 --> 00:47:33,063 There's nothing like individual accountability 936 00:47:33,146 --> 00:47:36,691 to send a deterrent across the whole market. 937 00:47:36,775 --> 00:47:38,443 If somebody's held accountable. 938 00:47:38,526 --> 00:47:42,656 We only have civil law enforcement, but that means barring them from the industry… 939 00:47:42,739 --> 00:47:45,575 - Trading. Right. - …or trading, or appearing before us. 940 00:47:45,659 --> 00:47:47,202 Willing to litigate-- 941 00:47:47,285 --> 00:47:51,122 This agency has to be willing to go into court 942 00:47:51,206 --> 00:47:54,584 and, you know, take some losses from time to time. 943 00:47:54,668 --> 00:47:57,045 - But go into court. - Right. 944 00:47:57,128 --> 00:47:58,505 I think all of those things. 945 00:47:58,588 --> 00:48:01,466 But it's trying to use high-profile cases 946 00:48:01,550 --> 00:48:05,512 to bring folks back on the right side of the line. 947 00:48:05,595 --> 00:48:09,432 And also, I would say a focus on gatekeepers. 948 00:48:09,516 --> 00:48:14,813 Gatekeepers. The accountants, the lawyers, the underwriters and so forth. 949 00:48:14,896 --> 00:48:18,483 Um, that sends a signal across a market too. 950 00:48:18,567 --> 00:48:20,360 Take out the little guys. 951 00:48:20,443 --> 00:48:21,444 No, no, no, no, no. 952 00:48:21,528 --> 00:48:24,364 - The gatekeepers. The gatekeepers, Jon. - [laughs] 953 00:48:24,447 --> 00:48:26,866 Coming back in a year, we're gonna see how this all worked out. 954 00:48:26,950 --> 00:48:28,618 Give us a little bit more time. But, yeah, I got it. 955 00:48:28,702 --> 00:48:30,579 By then it'll be a whole different financial market. 956 00:48:30,662 --> 00:48:32,789 - All right. Thank you. - Appreciate it. Fascinating. 957 00:48:32,872 --> 00:48:34,165 - Thank you. - Thank you. 958 00:48:35,500 --> 00:48:39,713 [announcer] A message from a Robin Hood to Robinhood. 959 00:48:39,796 --> 00:48:42,799 The whole thing about Robin Hood is... 960 00:48:42,883 --> 00:48:45,886 he steals from the rich and gives to the poor. 961 00:48:46,720 --> 00:48:49,306 That's it. Steals from the rich, gives to the poor. 962 00:48:49,389 --> 00:48:53,393 Robin Hood steals from the rich, gives to the poor. 963 00:48:53,476 --> 00:48:57,522 Again, from the rich, to the poor. 964 00:48:57,606 --> 00:49:00,358 Takes from the rich and gives to the poor. 965 00:49:00,442 --> 00:49:02,235 From the rich. To the poor. 966 00:49:02,319 --> 00:49:03,904 To the poor! 967 00:49:03,987 --> 00:49:07,741 You can't be a Robin Hood and not do that. 968 00:49:09,034 --> 00:49:11,995 It's not rocket science. 969 00:49:12,537 --> 00:49:15,165 You're a worse Robin Hood than Errol Flynn, 970 00:49:15,248 --> 00:49:18,752 and he was drunk the whole shoot. 971 00:49:18,835 --> 00:49:20,003 [audience applauding] 972 00:49:20,086 --> 00:49:22,255 Thank you, Robin Hood. 973 00:49:22,339 --> 00:49:23,673 Thank you. 974 00:49:25,091 --> 00:49:27,177 [audience cheering] 975 00:49:32,724 --> 00:49:34,976 I've been gone a long time, but I still got it. 976 00:49:35,060 --> 00:49:36,561 [audience laughs] 977 00:49:36,645 --> 00:49:39,105 Thanks for tuning in to what has to be, I think, 978 00:49:39,189 --> 00:49:43,485 one of the best pass-fail financial seminars we've ever given here. 979 00:49:44,194 --> 00:49:46,071 Uh, I feel like I'm at the New School. 980 00:49:46,154 --> 00:49:49,157 Please check out these resources. 981 00:49:49,241 --> 00:49:52,202 And while you're on the Web, you can also listen to our podcast. 982 00:49:52,285 --> 00:49:56,331 It's ad-free, so you don't have to listen to me pretend to be excited 983 00:49:56,414 --> 00:49:57,874 about a better way to buy stamps. 984 00:49:57,958 --> 00:49:58,959 I won't. 985 00:49:59,042 --> 00:50:01,002 [audience laughing] 986 00:50:01,086 --> 00:50:03,547 Although, if you are interested in-- No, I won't do it. 987 00:50:03,630 --> 00:50:05,757 [audience laughing] 988 00:50:05,840 --> 00:50:07,801 We also have a website, theproblem.com. 989 00:50:07,884 --> 00:50:10,971 It's almost as good as YouTube, but it's not as good as YouTube. 990 00:50:11,763 --> 00:50:13,348 Which is also why we're on YouTube. 991 00:50:14,516 --> 00:50:16,476 Thank you so much for tuning in to the program. 992 00:50:16,560 --> 00:50:19,354 We will see you next time. Bye-bye. 993 00:50:19,437 --> 00:50:21,064 [audience cheering, applauding] 994 00:50:28,947 --> 00:50:32,033 The rich and powerful employ an army of lobbyists. 995 00:50:32,117 --> 00:50:34,995 And the only thing that can fight back against that 996 00:50:35,078 --> 00:50:37,080 is an army of investors, like the apes. 997 00:50:37,163 --> 00:50:40,667 And this army needs to get organized and it needs to come together. 998 00:50:40,750 --> 00:50:41,918 And they need to engage 999 00:50:42,002 --> 00:50:44,170 with the Securities and Exchange Commission, the SEC. 1000 00:50:44,254 --> 00:50:48,008 You can write comment letters. You can even meet with SEC commissioners or staff. 1001 00:50:48,091 --> 00:50:50,135 By doing so, you can make sure 1002 00:50:50,218 --> 00:50:52,888 that the rules and regulations that are being considered and passed 1003 00:50:52,971 --> 00:50:55,432 are more favorable to individual retail investors 1004 00:50:55,515 --> 00:50:58,768 as opposed to this conglomerate of Citadel and Robinhood.