How an army of retail traders is beating billionaires at their own game

These three forces – Big Tech, Big Government and Corporate Media – make up what I call the “Unholy Trinity of the Markets.”

Together, they unfairly tip the scales of trading in the favor of institutions and big hedge funds.

Here’s an example of how institutions cheat retail investors

Big funds use their billions to short the hell out of select stocks
They wait for all that downward pressure to scare retail investors out of their long positions
Then they scoop up abandoned shares at a steep discount, netting tidy profits

They do this over and over, ruining the portfolios of countless retail investors.

Short selling is nothing new, of course.

It’s been a favorite ploy of the uber-rich to screw everyday investors since the days of Joseph Kennedy.

But things are 100 times worse now.

See, in Kennedy’s time, there was no such thing as computers.

But now – thanks to Big Tech, the first head of the Unholy Trinity of the Markets  – we not only have computers…

…  We’ve got trading algorithms that allow institutional investors to get in and out of trades in milliseconds.

There’s no way you can beat that.

But you can take some simple steps to protect yourself from the algos.

One way is to use stop limit orders instead of stop orders.

The reason – stop orders trigger a market order when the stock reaches a designated price…

… While a stop limit order triggers a limit order when that price is hit.

So with a stop limit order, you’re far more likely to get out at a better price.

Here’s an even bigger danger Big Tech presents to retail traders

Many trading platforms actually work to enrich greedy short-sellers at the expense of retail traders like you.

Take Robinhood Financial.

That trading platform was launched eight years ago to “democratize finance for all.”

Yeah, right…

As you know, Robinhood is under fire for having limited purchases of certain stocks, like GameStop (NASDAQ: GME).

What Robinhood does is charge a fee to the middleman taking the other side of a trade.

One of those middlemen is Citadel Securities.

That’s an affiliate of Citadel LLC (which is  – can you believe it – a freakin’ hedge fund).

In exchange for that fee, Robinhood allows Citadel Securities to see what orders are coming in a few milliseconds before they’re filled.

Do you see what that means?

Citadel can use these milliseconds to front-run the market and pocket the spread.

Doesn’t sound very fair to retail traders, does it?

Bottom line – Robinhood is using Big Tech algorithms to rob from the poor and give to the rich.

Subscribe to The Diary Newsletter

  • This field is for validation purposes and should be left unchanged.

Big Government does retail investors even worse

Big Government provides giant funds with a steady stream of retail traders to fleece.

We can thank the Federal Reserve for that.

About 13 years ago, the Fed took away the ability to generate a modest yield from Treasuries.

Remember the Financial Crash of 2007-2008? When they let interest rates plunge from 5.25% to 0.25%?[DF1]

As a result, anyone counting on making 5% or so on their nest egg was forced to turn to the markets for any hope of gaining that kind of yield.

Unfortunately, many of those traders had little investing experience.

So millions of them fell victim to institutional price manipulation and lost their shirts.

Obviously, this is still happening.

Now the markets are awash with cheap money from the Fed

And those cheap dollars are financing corporate buybacks.

Here’s how it works…

Companies borrow money at historically low interest rates and use it to buy back their stocks
These buybacks reduce the number of open shares on the market
That reduction causes stock prices to rise

The problem with these buybacks is they’ve boosted stock prices without adding any real shareholder value.

That’s why the Fed has been a major cause of the stock market’s rise to all-time highs.

The Fed is also responsible for inflation in North American real estate prices.

In the U.S., housing prices have inflated 60.29% since 2000.

And they continue to rise thanks to historically low borrowing costs.

These lower borrowing costs increase the demand for homes, which in turn causes prices to go even higher.

It’s a vicious circle that’s put home ownership out of reach for many young adults.

Now inflation is poised to throw the rest of the economy into a tailspin.

The reason…

The U.S. government is destroying the dollar’s value by rampant money printing

The dollar’s loss in purchasing power since the early 20th century has been breathtaking.

How an army of retail traders is beating billionaires at their own game

That’s a loss of more than 90%.

And now Citigroup is predicting the dollar will lose 20% more of its purchasing power in 2021.

Drastic drops in the value of other currencies is also happening in Canada… Europe… and most of the rest of the world.

The main reason for all this debasement, of course, is governmental money creation.

The way to protect your wealth from it?

Own physical gold and silver.

It’s no secret that precious metals have been protecting people’s wealth for thousands of years.

And they’re doing so again.

Thanks to eroding paper currency values, precious metals are in a relatively new bull market.

Gold’s already gone up about 52% since Sept. 1, 2018 to Feb. 16th, 2021 (from $1,191 to $1,808 an ounce).

Silver’s rise has even been more dramatic.

It’s shot up 85% during that same period, from $14.62 to $27 an ounce.

Odds are strong that gold and silver will continue this trend.

Enter Corporate Media – the third head of the Unholy Trinity of the Markets

Before I start talking about Corporate Media, allow me to revisit how short-sellers rip off retail investors:

They short stocks to the point where long retail investors can’t stand the pain any more…
These retail investors panic and sell out at a big loss…
Short-sellers then become buyers to drive prices up
Breathless CNBC cheerleaders implore viewers to get in on the action…
Financial analysts (who often work for hedge funds and other big institutions) follow suit…
Magazines start running cover stories on these “can’t miss” profit opportunities…

Afraid of missing out on this “easy money,” retail investors pile into these stocks.

But once retail buying peaks, institutions switch gears again and started short-selling.

The Corporate Media makes all this whipsawing possible.

That’s not the only way the Corporate Media takes advantage of retail investors

Take Jim Cramer, who hosts CNBC’s wildly popular Mad Money.

Back in the 1990s, he was guest editor for a publication called Smart Money.

In February 1995, Cramer touted three thinly traded stocks in Smart Money that he had already bought into.

After those recommendations, volume on those stocks exploded…

… And their share prices jumped up $2 million in value.

While what he did wasn’t illegal, the ethics are questionable at best.

In the aftermath, Smart Money prohibited outside contributors like Cramer from writing about stocks with market caps of less than $500 million.

So there you have it – how the Unholy Trinity of the Markets work against retail investors

But now retail investors are fighting back. And, they’re starting to beat the big funds at their own game.

Through sharing information and insights with each other online and in trading forums.

… They’ve been buying select stocks some hedge funds have been heavily shorting.

Take the Redditors on the r/WallStreetBets thread. Their initial efforts with GameStop (NYSE: GME) cost short-selling hedge funds billions of dollars.

On the flip side were those who were long these stocks.

For example, as of Feb. 1, nine big investors – including Blackrock and Fidelity’s FMR – were up $16 billion on GameStop, according to Investor’s Business Daily.

(Since then the stock has dropped significantly  – and at the time of this writing, it isn’t known if any of these investors have cashed out of their positions).

Countless retail traders also got a piece of the GameStop action.

They include Keith Gill, who had reportedly turned $50K into a $22 million paper gain as of Jan. 26, when the stock closed at $147.98.

(As of Feb. 14th, it was reported Gill is now sitting on about $13 million in cash, with tens of millions more in GameStop stock and options)

And while GameStop has lost much of its value since the end of January, the point was made…

Retail investors can go toe-to-toe with institutions and win.

Legions of new retail traders are eager to learn how.

That’s a big reason why TD Ameritrade’s free educational resources have tripled (from Oct. 2019 to Oct. 2020).

Bottom line – a growing army of retail traders is determined to level the playing field.

They’re neutering the power of the Unholy Trinity of the Markets to aid and abet multi-billion-dollar hedge funds.

That’s bad news for these funds…

… But good news for retail investors like you.

Here at Dear Retail, we’re thrilled to be a part of this development.

Dear Retail was created by retail investors for retail investors.

It’s our mission to reveal what’s really going on in the markets, alert you to high-probability profit opportunities, and teach you sound investment strategies.

In short, we’re here to educate you so you can bring your dreams to life through market profits.

That’s it for now – stay tuned.

 

 

To your financial independence,

Doug Fogel

Contributing Editor, Dear Retail

Are You Ready For The Next Market Move?

“Warning Signs” – Goldman Sachs
Yale’s Crash Confidence Index Higher Than Dot-Com Bubble Top
Crucial New Research: Three Fortune-Protecting Rules For Even The Toughest Markets
  • This field is for validation purposes and should be left unchanged.

Comments are closed.