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Short Squeeze 101 If you follow financial markets (or if you watch Billions), you've heard the phrase "short squeeze" used quite frequently. But what is a "short squeeze" and how does it work? Here's Short Squeeze 101! 👇👇👇

1/ First, the basics. The "short" in "short squeeze" refers to the concept of short selling. The basics are covered in my thread below. TL;DR - short selling is a way of betting against a stock - i.e. betting that its price will decline.

Sahil Bloom @SahilBloom1/ Short Selling 101 With the markets continuing to rally, there has been more talk of “shorting” or “short selling” stocks. But what does that mean and how does it work? Here’s a quick educational primer: Short Selling 101 twitter.com

2/ "Short interest" is a measure of how heavily an asset is shorted by the market. It is the total number of shares that have been sold short (borrowed and sold), but have not yet been covered (bought and returned). It is usually measured as a % of the # of shares outstanding.

3/ A "short squeeze" occurs when a heavily-shorted asset experiences a rapid upward price movement. When this happens, short sellers may be forced to close their short positions (i.e. buy the stock and return it to the broker), further accelerating the upward price movement.

4/ Let's look at a simple example to show this in action. We will use Tesla, one of the most heavily-shorted stocks in the world. Imagine the stock price is $1,000 per share. This seems crazy. Ricky Rational decides to short the stock at this level.

5/ Ricky borrows 1 share from his broker, agreeing to return the borrowed share in the future. He sells it short at $1,000. If the price declines, great. He is now able to buy a share at $800. Ricky returns that share to his broker and closes his short with a $200 profit!

6/ If the price rises, not so great. His broker gets nervous about his ability to pay and forces him to replace the borrowed share. He buys a share at $1,200 and closes the short in a loss. In both cases, the "closing" of the short requires a purchase of shares of the stock.

7/ Therein lies the makings of the short squeeze! If Tesla stock rises rapidly (which it does far too often), Ricky and many others may all be forced to close their shorts at once. This creates a surge of buying (to return the borrowed shares) and drives the price up further.

8/ Short sellers are literally squeezed out of the market. You can track short interest in specific stocks to determine when one may be occurring. So next time you see a chart that shows a sharp rise, followed by another, even sharper rise, you may be seeing a short squeeze.

9/ That was Short Squeeze 101! I hope it was helpful. For more educational threads on money, finance, and economics, check out my meta-thread below and follow along for more.

Sahil Bloom @SahilBloom1/ An Allegory of Finance I have been posting a lot of educational (and humorous!) threads on finance, money, and economics. My mission is simple: to demystify these concepts and make them accessible to everyone. All of the threads can be found below. Enjoy and please share! twitter.com

In 1920, long before Bernie Madoff was born, an Italian immigrant named Charles Ponzi was concocting a scheme to make himself rich. Ponzi's eponymous scheme would inspire fraudsters like Madoff for years to come. Who's up for a story? 👇👇👇

1/ Charles Ponzi needed a new scheme. Since arriving in America from Italy, his life had been a series of flops. By 1918, when he moved to Boston, he had served time in prison in both Canada and the US. But his confidence never faded. Soon, he had hatched his next plan.

2/ His plan involved a seemingly innocuous instrument - the Postal Reply Coupon ("PRC"). Postal Reply Coupons were redeemable for stamps. They were created by the postal authority to enable immigrants to more easily and cost effectively correspond with relatives back home.

3/ Charles Ponzi noticed an arbitrage opportunity. You could use dollars to buy PRCs in Europe, come to America, and then redeem the PRCs in America for postage more valuable than what you paid in Europe. Arbitrage. He just needed investors and capital to execute the plan!

4/ Ponzi created a company - the Securities Exchange Company* - and began pitching investors on PRCs, the opportunity of a lifetime. He would guarantee a 50% return in 45 days or a 100% return in 90 days. Their choice! *Note: The irony of the SEC abbreviation is amazing.

5/ In February 1920, soon after launch, with his smile and easy confidence, he had taken in $5K from investors. But executing the PRC arbitrage would be logistically challenging. So he didn't do it. Instead, he used new investor funds to show returns to the original investors.

6/ Overjoyed by their "returns," early investors rolled their gains into new investments with the company. Then they told all of their friends about the incredible opportunity. The party was on for Charles Ponzi! Managed $ exploded: ▪️ March: $30K ▪️ May: $400K ▪️ July: $3M

7/ Money poured in from investors across New England. From policemen to factory workers to housewives, everyone wanted access to Mr. Ponzi's offering. At its peak in August 1920, Charles Ponzi's scheme had ~17,000 investors and had taken in ~$10M, equivalent to ~$135M today.

8/ But the perfect facade soon began to crack. The Boston Post printed articles questioning the legitimacy of the returns. Investors rushed to withdraw funds. Ever the confidence man, Charles Ponzi famously served coffee and donuts to a line of investors awaiting withdrawals.

9/ With no new money coming in to meet investor demands, Charles Ponzi was declared insolvent and arrested, his brazen fraud finally exposed. The entire episode lasted just ~8 months, but Ponzi had managed to take in millions. All without buying a single Postal Reply Coupon!

10/ And so the "Ponzi Scheme" was born. Future fraudsters like Bernie Madoff would use this blueprint - using new money to provide returns to old money - but with ever increasing scale ($60B+ in Madoff's case!).

11/ After serving his prison sentence in America, Charles Ponzi was deported back to Italy. His final words for reporters: "I went looking for trouble, and I got it." He died in 1949 at the age of 67, alone and penniless, but his eponymous scheme lives on in infamy.

12/ That is the story of Charles Ponzi and the background behind the "Ponzi Scheme" that is so often talked about in the modern financial world. I hope you enjoyed it. Stay tuned for more!

Derivatives 101 The term "derivatives" is often used in the world of finance. But for most people, it is just another example of complicated financial jargon. Often used, seldom understood. Let's fix that. Here's Derivatives 101! 👇👇👇

1/ A "derivative" is just a contract with a value that is based on something else. Its value is DERIVED from something else. If I create a contract called the SB that is linked to my # of Twitter followers, that is a derivative. The contract value is derived from my followers.

2/ In financial terms, derivatives are a security that is tied to an another asset - called the "underlying asset." The underlying asset could be: 1⃣ Stocks 2⃣ Bonds 3⃣ Commodities 4⃣ Currencies 5⃣ Interest Rates Really anything can be an underlying asset. Get creative!

3/ Derivatives can take on many different forms. The most common are: 1⃣ Options 2⃣ Futures/Forwards 3⃣ Swaps We covered the basics of Options in Options 101. I will soon cover Futures and Swaps to explain what they are and how they work. Stay tuned.

Sahil Bloom @SahilBloom1/ Options 101 - Call Options Over the last few months, with the rise of Robinhood and the day trading boom, options trading has been featured prominently in the news (for better or for worse). But what is an option and how does it work? Here’s Options 101 - Call Options! twitter.com

4/ Derivatives are widely used by investors. The most common use cases are: 1⃣ Hedging - offset/protect a position 2⃣ Speculation - bet on price moves 3⃣ Leverage - amplify a position Naturally, using derivatives for a hedge is less risky than using them for leverage.

5/ This was a very basic, 10,000-foot overview on derivatives, their common forms, and their use cases. I will cover the common forms in additional detail (with simple examples, of course!) in future threads. So that's Derivatives 101! I hope this was a helpful primer.

In 1865, a 30-year old financier named Jim Fisk made a fortune betting on the fall of the Confederacy. It was the original "big short" - a financial scheme you have to read to believe. Who's up for a story? 👇👇👇

1/ Jim Fisk was on his last legs. The stockbroker had won over wealthy clients, but had failed to turn a profit in the bear market. In fact, he had lost it all. Ever the optimistic schemer, he soon found what he believed was the opportunity of a lifetime.

2/ In 1865, the American Civil War was in its final stages. It appeared increasingly likely that the Union would defeat the Confederacy. While this defeat appeared certain, Fisk noticed that bonds issued by the Confederacy were trading in London at 35 cents on the dollar.

3/ Realizing the bonds would be a total loss (trade down to 0) in a Confederate defeat, Fisk created a plan. He would short* Confederate bonds in London markets. But to make a killing, he had to be certain. *Note: a primer on short selling is below.

Sahil Bloom @SahilBloom1/ Short Selling 101 With the markets continuing to rally, there has been more talk of “shorting” or “short selling” stocks. But what does that mean and how does it work? Here’s a quick educational primer: Short Selling 101 twitter.com

4/ To execute this scheme to perfection, Fisk needed a few things to line up. He needed to know the moment the Confederacy was defeated. He needed to be the first one with that news in the London markets. Fortuitously, the transatlantic telegraph system was down at the time.

5/ So Fisk set his plan in motion. He placed a fast steamer (with a co-conspirator onboard) to await his word in Halifax, the North American port closest to London. Upon receiving news of a Union breakthrough, Fisk bribed a telegraph operator to send his ship a message. "Go!"

6/ Without any direct lines of communication from America to London, that head start proved consequential. Fisk's co-conspirator reached London a full 5 days before the official news would arrive. In a few days, he had managed to short ~$5M in Confederate bonds (~$80M today).

7/ When the news arrived a few days later, the value of the Confederate bonds predictably collapsed. Fisk had made his fortune, pocketing somewhere in the realm of $4M (equivalent to $63M today). For Fisk, the 30 year-old financial schemer, this was the score of a lifetime.

8/ Sadly, the story of Jim Fisk does not have a happy ending. He had soon squandered his newfound wealth in a series of ill-advised financial adventures (including an attempt to corner the gold market in 1869). In 1872, at 37, he was murdered by his business partner.

9/ The story of Jim Fisk is one of incredible financial ingenuity. It is also a story of the risks of believing that one success is a guarantee of future successes. I hope you enjoyed this tale as much as I did. Stay tuned for more!

1/ VIX 101 If you follow the financial news, you've probably heard a lot of talk recently about the VIX. But what is the VIX and how does it work? Here's VIX 101!

2/ The Volatility Index ("VIX") was created by the Chicago Board Options Exchange as a real-time market index representing the market's expectation of 30-day forward-looking volatility. It is often referred to as the "Fear Index" by investors. Let's take a look at how it works.

3/ Volatility measures the magnitude of price movements (up and down) over a set period of time. Historical volatility is based on actual historical price movements. Forward-looking volatility ("implied volatility") is inferred based on option prices.

4/ The VIX infers its value by tracking the pricing of S&P 500 index options. But what do S&P 500 options prices have to do with investor fear?

5/ When investors expect stock prices to make a significant move (up or down), they typically purchase more options to protect themselves against those movements. Think about it as buying insurance to protect your home if you’re expecting an earthquake to hit soon.

6/ So in an environment where investors expect a big near-term price drop, it is reasonable to expect a surge in demand for put options. There is more uncertainty in the market, so investors seek protection via these options. Demand for them rises.

Sahil Bloom @SahilBloom1/ Options 101 - Put Options Yesterday, I posted Part 1 of Options 101, covering call options. I can’t leave my Bears hanging (the market has done enough of that!), so it only feels right that I cover put options next. Here’s Options 101 - Put Options! twitter.com

7/ If demand rises quickly, supply will not have a chance to catch up. Econ 101 tells us that the price of the options must rise. Since we know the VIX tracks the pricing of S&P 500 index options, we can see the relationship form. S&P 500 put option prices spike = VIX spike.

8/ To use a real example, the VIX spiked to a peak of >80 in mid-March, as fears of COVID-19 damage peaked. It has steadily declined since, as Central Banks worldwide have eased investor fears. Typically, VIX values <20 correspond to stable, low-stress periods in the markets.

9/ Since the VIX is an index, you cannot trade it directly. But this is finance, so interested investors can speculate on movements in the VIX in a number of other ways: 1⃣ - VIX futures contracts 2⃣ - VIX options 3⃣ - VIX ETFs ($VIXY) That was VIX 101! I hope it was helpful.

1/ ETFs 101 My Mom texted me recently asking, “What’s an ETF?” A financial advisor had pitched her on investing her money in a “diversified pool of ETFs” (to sound complex, obviously). But what is an ETF and how does it work? So for my Mom (and all of you), here’s ETFs 101!

2/ Just think of an Exchange-Traded Fund (“ETF”) as a basket of goods. The goods are financial assets, such as stocks, bonds, commodities, etc. You can buy shares (partial ownership) of this basket. It’s similar to a mutual fund, but can be freely-traded, just like a stock.

3/ ETFs can track sectors, asset classes, indexes, etc. They provide liquid (convertible to cash), low cost diversification. The biggest ETF isssuers are @blackrock (@iShares), @Vanguard_Group, and @StateStreetETFs. The largest ETFs are $SPY $IVV $VOO (all track the S&P 500).

4/ To illustrate how it works, let’s use a simple story. Imagine you live in a remote village in 1700s France. You don’t have access to the bustling street markets of Paris, you have no way of getting there. You want to trade in exotic goods, but you can’t.

5/ Luckily, the richest man in town, Mr. ETFienne, has a plan. He rides to Paris in his carriage and buys a big basket of exotic goods. He offers you a share, on paper, of his basket. He takes your money (and a small fee for his trouble!). You now own one share ETFienne’s ETF.

6/ You’re an exotic goods trader now. All without leaving the comfort of your own village! You paid 5 Livre (the 18th century French currency for you non-history buffs) for the one paper share. With it, you indirectly invested in a diverse basket of exotic teas and spices.

7/ If war breaks out in the colonies and the prices of these goods become volatile, you can buy and sell the ETF shares to speculate on these price movements. If the prices are stable and growing, you can hold onto your ETF share to accumulate wealth. “ETFs are great!” you say.

8/ So as we see in this story, Mr. ETFienne’s ETF was just a basket of goods whose shares were freely-traded on an open market. Why use ETFs? 1️⃣ - Liquidity 2️⃣ - Diversification 3️⃣ - Tax Efficiency In summary, ETFs may be a better option than mutual funds for many investors.

9/ That was ETFs 101! Mom, I hope you’re reading this, and I hope you see that ETFs aren’t as complicated as you may have been led to believe. Please share with your friends and family and send any other suggestions for topics my way. Stay tuned for more...

10/ Note: There are complexities to ETF construction that I have glossed over in this 101. If interested, I can cover them in a future thread, but in the interim, please see the link below. My smart friend @SeifelCapital would be happy to talk shop on it. https://www.investopedia.com/articles/mutualfund/05/062705.asp

1/ The “Fed Put” 101 If you’ve been following the financial media, you may have heard @mcuban and @elerianm on @SquawkCNBC referring to the “Fed put” in the markets and its impact on asset prices. But what is the “Fed put” and how does it work? Here’s “Fed Put” 101!

2/ When people refer to the “Fed put” in the markets, they are making reference to a put option. As we covered in Options 101 (refresher below), a put option gives the buyer the right, but not the obligation, to sell an asset at a set price by a specific date.

Sahil Bloom @SahilBloom1/ Options 101 - Put Options Yesterday, I posted Part 1 of Options 101, covering call options. I can’t leave my Bears hanging (the market has done enough of that!), so it only feels right that I cover put options next. Here’s Options 101 - Put Options! twitter.com

3/ In this context, the phrase “Fed put” is used to refer to the notion that stock buyers believe they have an ability to sell their assets to the Fed at a good price at any point in the future. The Fed has been clear it will support markets, so the notion isn’t without merit!

4/ As @mcuban and @elerianm point out, this contributes to asset price inflation. Why? The Fed put acts as a hedge (downside protection!), allowing for more risk-taking to the upside. If you’re at the casino and your rich friend offers to cover your losses, you bet bigger!

5/ The “Fed put” isn’t new. It was originally called the “Greenspan put” - a reference to former Fed chairman Alan Greenspan, who first engaged in expansive asset purchases during the 1987 market crash. I would argue it dates back further, to the “FEDerico put” of 1500s Italy!

Sahil Bloom @SahilBloom1/ A Thread on Markets It is the year 1500 and you enter a market in Renaissance-era Italy. There are buyers and there are sellers. Prices of the various goods are determined by the interaction by and among these individuals. Now in walks Mr. FEDerico, a man of endless means. twitter.com

6/ Central bank market intervention is a controversial and highly-relevant topic. I hope this primer helps you feel more educated on the subject. With apologies to my Austrian economists, that was “Fed Put” 101! Please share and send any suggestions for future topics!

1/ Margin Trading 101 If you follow the stock market and financial news, you’ve undoubtedly heard a lot of talk about margin trading or margin calls. But what is margin trading and how does it work? Here’s Margin Trading 101!

2/ First, some definitions. “Buying on margin” is just the financial jargon for using loaned money to buy assets. Someone loans you money and you use it to buy a stock - you are buying on margin. “Margin” is defined as the total value of the asset minus the borrowed amount.

3/ When you buy on margin in a brokerage account, the stocks you buy are collateral. This is the same as buying a house with a mortgage. The house is collateral for the loan. So how does it work and what is the deal with the dreaded margin call? Let’s look at a simple example.

4/ Imagine you want to buy a plot of beachfront land on the coast of Nicaragua. It’s beautiful, but still pretty cheap due to political instability. It’s the next Costa Rica! You’re sure of it. The land costs $1M today. So you ask your rich friend Jimmy for a loan to buy it.

5/ You put up $200K and Jimmy loans you the remaining $800K. You buy the land and are the proud owner of prime Nicaraguan real estate. Congratulations, you just bought on margin! Margin = Asset Value - Loan Value Margin = $1M - $800K Margin = $200K

6/ Shortly after you buy the land, riots break out across the country, causing tourism to grind to a halt. Land values plummet. Jimmy starts to get nervous. He previously had $1M of collateral covering his $800K loan, but now the market value of the collateral is just $500K!

7/ Jimmy calls you, explaining that he needs you to put up some additional cash as collateral to make him whole. Otherwise, he will be forced to seize the collateral (your Nicaraguan beachfront land!) and walk away. This was a “margin call” (literally and figuratively!).

8/ In an alternate universe, if the land value had increased, the returns on your $200K investment would have been amplified given you bought the land on margin. Effectively, buying on margin is a way to amplify returns on the upside, but it also amplifies risks on the downside!

9/ It is essential to educate yourself before entering into a loan agreement (whether for a house or a brokerage account). Never trade on margin if you are going to be in financial distress if you get margin called! So that’s a simple primer on the topic. I hope it was helpful!

1/ How to Hack Better Like many of you, I was disappointed by the follow-through of the Twitter hackers yesterday. They seized control of the accounts of the world's most influential individuals and they went with...a Bitcoin scam?! So let's play a game: How to Hack Better.

2/ Imagine you are the CEO of a criminal organization. You have devised an ingenious backdoor hack into Twitter that will grant you complete (yet temporary) access to all Twitter accounts. "How can we make, like, a gazillion dollars off of this?" you ask your co-conspirators.

3/ "Oh, I know, a Bitcoin scam! We say 'send us Bitcoin, and we will send more back,'" Keith suggests. You sigh, rolling your eyes. "That's stupid, Keith," you reply (correctly, I might add!). "Think much bigger. We'll have immense, God-like power over the internet!"

4/ You decide to focus on the global financial markets. The volume and liquidity means you can hide in plain sight. Tanking the markets is too obvious, but pumping them, well, that's just modern politics! So you start buying up short-dated call options on airlines and cruises.

5/ You buy across hundreds of accounts with small volumes in each and in high-volume names - you need to cover your tracks. Now, for the tweets... Bill Gates: "We will have a vaccine in August!" Federal Reserve: "We will begin buying equity ETFs to support market functioning."

6/ You execute the hack, send the tweets, and watch as the markets surge to all-time-highs. Slowly, you exit the positions, capturing a massive profit for your organization. "Now this is the life!" you say, lounging on your new yacht. "Bitcoin scam?! Lol."

7/ Note: I am well aware that this may have been about more than Bitcoin, but for humor's sake, I enjoy thinking about it as a silly, amateurish broken hack-job.

1/ Options 101 - Put Options Yesterday, I posted Part 1 of Options 101, covering call options. I can’t leave my Bears hanging (the market has done enough of that!), so it only feels right that I cover put options next. Here’s Options 101 - Put Options!

2/ First off, make sure you are familiar with the basics. Check out my first thread below to get a quick primer (or refresher!) on the topic.

Sahil Bloom @SahilBloom1/ Options 101 - Call Options Over the last few months, with the rise of Robinhood and the day trading boom, options trading has been featured prominently in the news (for better or for worse). But what is an option and how does it work? Here’s Options 101 - Call Options! twitter.com

3/ The easiest way to think of a put option is that it is an insurance policy. Imagine you own a house that is worth $1M. You live in California, so you worry about earthquakes. You decide to buy an insurance policy. So you call up your rich friend, Paul. You offer him a deal.

4/ You will pay him for an insurance policy on the house with $1M of coverage. You’ll pay $50K for the policy, which will expire in December 2025. Paul accepts. Congratulations, you’ve just purchased a put option! Strike = $1M Expiration = December 2025 Premium = $50K

5/ You’re not as worried about an earthquake now. You’re covered! One of two scenarios now plays out: 1️⃣ - No Earthquake = 🏠 Fine 2️⃣ - Earthquake = 🏠 Damaged

6/ In scenario 1, you don’t “exercise” your option. The house is fine. You’re only out the $50K premium - worth it for the peace of mind! In scenario 2, you exercise your option. The house is damaged. Paul pays you $500K for the damages. You’re happy you bought the insurance.

7/ So to summarize the 101 series... Call Option = Bullish Bet Put Option = Bearish Bet Why buy options? ▪️Speculate on price movements ▪️Hedge long or short exposure More to come on the nuances of options - pricing, selling/writing - in Options 102 and 103! Stay tuned...

1/ Options 101 - Call Options Over the last few months, with the rise of Robinhood and the day trading boom, options trading has been featured prominently in the news (for better or for worse). But what is an option and how does it work? Here’s Options 101 - Call Options!

2/ In simple terms, an option is a contract. It gives the buyer the right, but not the obligation, to buy (a “call”) or sell (a “put”) an asset. It specifies the price at which the asset can be bought or sold (“strike”) as well as a date this must occur before (“expiration”).

3/ The buyer of the option has to pay to have that right to buy or sell. The “premium” is the price they pay for the option. Let’s use a simple example to illustrate how this works. In this thread, we will cover the call option. (Don’t worry, Bears, I’ll cover the put soon!)

4/ Imagine you are in the market for a new house. You find the perfect one in a town nearby. You hear the town may get a nice new mall, so housing prices may rise quickly. Paul, the house’s owner, wants $1M for it. You don’t have that kind of money today, but you will soon.

5/ You don’t want Paul to put the house on the market. You worry someone else will snatch it up! So you offer Paul a deal. You’ll pay him $50K today for the right to buy the house for $1M before December 31. Paul agrees to the deal.

6/ Congratulations, you just bought a call option! Strike = $1M Expiration = December 31 Premium = $50K One of two scenarios now plays out: 1️⃣ - Mall Built = 🏠 Prices ⬆️ 2️⃣ - Mall Not Built = 🏠 Prices ⬇️

7/ In scenario 1, you “exercise” your option to buy the house for $1M. You are happy. The house is worth $1.2M now and you got it for $1M (plus the $50K option premium). In scenario 2, you don’t exercise. The house is now only worth $900K. You’re only out the $50K, so it’s ok.

8/ So you were effectively in control of a $1M house for only $50K. There are more nuances to this - selling/writing, pricing dynamics - but we can save those for 102 and 103! I hope this was a helpful primer! Stay tuned for part 2 of Options 101, where I’ll cover put options.

1/ Gold Standard 101 With the accelerating pace of money printing globally, interest in gold has boomed. If you’re following along, you’ve probably heard or read about the “Gold Standard” system. But what is a “Gold Standard” and how does it work? Here’s Gold Standard 101!

2/ In simple terms, the Gold Standard is a monetary system where paper currency has a value tied directly to gold. Under this system, paper currency is a claim on gold at a set exchange rate. So if I had a $100 bill, I could go to a bank and redeem it for a quantity of gold.

3/ The basic appeal here is that the system restricts the creation of new money. The physical quantity of gold is a limiter on paper money creation. You can trust in your paper currency, as it is backed by hard money. Let’s look at a simple society to illustrate how it works...

4/ Imagine an island society - Goldland. Goldlanders are a fiscally prudent bunch! The Goldland Central Bank has 1,000oz of gold. It issues 1,000,000 in paper currency - called Golders - backed by the gold. Goldlanders can thus exchange 1,000 Golders for 1 oz of gold.

5/ Goldland mines only surface about 25oz of new gold each year. So the Central Bank can only issue 25,000 in new Golders each year. It must maintain its ability to meet gold exchanges! Therefore, money supply increases at 2.5% max (less over time if the 25oz remains constant).

6/ This system gives Goldlanders comfort. They can exchange their paper currency for hard money gold, which has real, tangible value (it is durable, scarce, etc.). They can trust their paper currency. It cannot be endlessly created! This is a pure form Gold Standard system.

7/ Now I’ve intentionally used a very simple example to highlight the basics in 101. There are further complexities to this - reserve requirements, multiple countries, shocks - but we can save those for later. I hope this was a helpful primer on the topic. Follow me for more!

1/ Bonds & Yields 102 This week, I posted a thread laying out the basics of bonds and yields - Bonds & Yields 101. I got a lot of questions on more advanced topics - yield to maturity, negative yields - so I'll continue with the series. Here's Bonds & Yields 102!

2/ First off, make sure you follow the basics. Check out my thread - Bonds & Yields 101 - to get a quick primer on the topic.

Sahil Bloom @SahilBloom1/ Bonds & Yields 101 If you follow the financial news, you see and hear a lot of talk about bonds and bond yields. But what are they and how do they work? Here’s Bonds & Yields 101! twitter.com

3/ Let's talk about Yield to Maturity. In Bonds & Yields 101, we covered the concept of Yield in its most basic form: Current Yield. Current Yield is just the return an investor would earn if she purchased a bond and held it for a year. Current Yield = Annual Coupon / Price

4/ Yield to Maturity ("YTM") is the annual return an investor would earn if she purchased a bond and held it until maturity (when the principal is paid back in full). At issuance, the Current Yield and Yield to Maturity are equal, but they deviate over time.

5/ An example: Say you buy a Hertz bond (don't do this!) that matures in 1 year and has a 10% coupon rate and a $1,000 par value. You pay $800 for the bond. Current Yield = $100 / $800 = 12.5% YTM = (Interest+Principal) / Price - 1 YTM = ($100+$1000) / $800 - 1 YTM = 37.5%

6/ Note that the equation becomes more complicated when looking at longer maturities, as you have to discount the future cash flows. We can save that for another thread! Now that we have the basics down, let's take a look at a very relevant (and weird) topic: negative yields.

7/ How do negative yields work? Let's slightly modify our example to illustrate. You buy a US Treasury bond (safe!) that matures in 1 year and has a 1% coupon rate and a $1,000 par value. You pay $1,100 for the bond. YTM = ($10+$1000) / $1,100 - 1 YTM = -8.2% Negative yield!

8/ So negative yields arise when an investor is receiving less money by holding the bond than they paid to purchase it. An investor is PAYING for the right to loan money - weird! Why might this happen? ▪️ Flight to safety ▪️ Central Bank "yield curve control" ▪️ Deflation risk

9/ We will see more of this globally in the years to come (hint: buy gold!). While far from comprehensive, I hope this was a helpful primer on the concept of Yield to Maturity and how negative yields may arise in this environment. Stay tuned for more in this series...

1/ Mafia Bonds 101 The @FT (h/t @MilesMJohnson) published an amazing story this week on bonds backed by the cash flows from Italian mafia operations. It’s a hilarious story of financial chicanery, so is the subject of this week’s Friday Funny thread. Here’s Mafia Bonds 101!

2/ Imagine you are the don of a nice, upstanding (and financially-savvy!) Italian mafia family. Like all good mafias, you operate a wide array of businesses, including several that provide “legitimate” services to the government. You bill the government for these services.

3/ But you’re a mafia, you have to have some fun! So you also do some extortion and fraud in these billing practices. The invoices are extorted. Mafia fun! The government, unsurprisingly, was slow or late in paying these invoices. So you decide to get mafia creative!

4/ These invoices have expected cash flows, you reason, so there must be a market for them. As it turns out, there are enterprising investment bankers packaging up pools of these late government invoices, issuing bonds backed by their future cash flows. “Lol finance!” you say.

5/ The bankers tout the “asymmetric risk reward profile” of these Mafia-backed bonds to investors. They sell the bonds, landing you a nice lump sum (and clipping themselves a hearty fee, of course!). “Finance is wild LMAO,” you laugh, while lounging on your brand new yacht.

6/ So to recap, we have an Italian mafia family, extorted invoices, creative securitization, and greedy investors chasing yield. Ah, the joys of modern finance! Here’s the link to the article. Kudos to @FT @MilesMJohnson for uncovering the amazing story! https://www.google.com/amp/s/amp.ft.com/content/bcebd77c-057b-4fd0-bd99-b97e0e559455

1/ Bonds & Yields 101 If you follow the financial news, you see and hear a lot of talk about bonds and bond yields. But what are they and how do they work? Here’s Bonds & Yields 101!

2/ Bonds are a debt funding instrument. The simplest way to think about a bond is that it is a loan given to a company or government by an investor. The entity borrowing money is said to “issue” a bond (i.e. put it up for sale). Investors “buy” the bond, providing a loan.

3/ As with any loan, the investor who purchased the bond is paid interest on the money they loaned and will receive its principal back on a set future date (“maturity date”). The company or government that raised money can now use the funds to support operations or investment.

4/ The perceived “default risk” of the borrower (i.e. the risk of the loan not being repaid) determines the interest rate investors will require as compensation for taking this risk. This rate is called the “coupon” of the bond. High Risk = High Coupon Low Risk = Low Coupon

5/ The bond “yield” is just the expected return of owning the bond. Yield = Coupon Amount / Price Simple Example: If I pay $1000 for a bond with a $100 annual coupon, that would be a 10% yield ($100 / $1000).

6/ Bonds are tradeable instruments whose prices fluctuate in the open market due to various factors (issuer risk profile, interest rates). As such, bond yields are dynamic. If I sell that same bond from above for $500, the yield to the new investor would be 20% ($100 / $500).

7/ Bond prices move based on supply and demand. More demand increases the price of the bond, and thus drives down yield (and vice versa). Yields ⬇️ = Demand ⬆️ Yields ⬆️ = Demand ⬇️

8/ Why should you care? Well, we can learn a lot from the bond market. Treasury bond yields at historic lows? Investors are buying and flocking to safety... Hertz bond yields spiking? It may be in financial trouble... That’s Bonds & Yields 101. Stay tuned for more!

1/ SPAC 101 The Special Purpose Acquisition Company (“SPAC”) has grown in prominence in recent years, most recently appearing in the news with @BillAckman’s unicorn SPAC and @nikolamotor’s successful market debut. But what is a SPAC and how does it work? Here’s SPAC 101!

2/ A SPAC is used to take a company public without going through the traditional IPO process. The SPAC is a shell company (i.e. it has no formal operations) that is taken public via an IPO to raise money from investors. It is often called a blank check company.

3/ The founder of the SPAC then hunts for a deal, looking for a private company to merge with. Once a target is identified, the SPAC merges with the private company, taking the private company public, but without the IPO grind. The SPAC effectively becomes one with the target.

4/ What are the primary benefits and drawbacks for a target company? Benefits: ▪️Certainty of a deal ▪️Process ease ▪️Flexible structure (warrants, etc.) ▪️Lower compliance hurdles Drawbacks: ▫️Higher effective fees ▫️No market check on price

5/ As with all novel financial concepts, there are some real tradeoffs. Keep an eye on how this space develops as more private companies look for alternatives to the traditional IPO process (e.g. direct listings, SPACs, etc.). That was SPAC 101. I hope it was helpful!

1/ Money Printing 101 By now, we have all seen the “money printer go brrrr” meme and have heard about the money printing exploits of central banks. But what is money printing and how does it work? Hint: it rarely involves a physical money printer. Here’s Money Printing 101!

2/ In the digital age, where money is more often just numbers on a screen vs. true cash tender, Central Banks generally “print” money (i.e. increase money supply) in one of two primary ways. 1️⃣ - Debt Monetization 2️⃣ - Quantitative Easing Let’s hit the basics of each one.

3/ “Debt Monetization” is just a fancy way of referring to the conversion of debt into money - think of it as you “money-tize” the debt. The government issues a new bond, the Central Bank buys it. This gives the government new money supply to finance deficit spending.

4/ “Quantitative Easing” is just a fancy way of referring to the Central Bank buying financial assets from non-government entities in the open market. When the Central Bank buys, this has the effect of increasing money supply, as it gives money to the sellers of these assets.

5/ So while both Debt Monetization and Quantitative Easing increase money supply, neither one of them involves a physical money printer going brrrr. More accurately, they print money digitally by buying assets from sellers. So that’s Money Printing 101. I hope it was helpful!

1/ Short Selling 101 With the markets continuing to rally, there has been more talk of “shorting” or “short selling” stocks. But what does that mean and how does it work? Here’s a quick educational primer: Short Selling 101

2/ When you believe a stock is going to rise in value, you are said to be “long” the stock (“bullish”). When you believe a stock is going to decline in value, you are said to be “short” the stock (“bearish”). Short selling is simply how you bet on the decline in value.

3/ Imagine you read that Colombia is experiencing a very wet Summer. You believe this will lead to a huge coffee harvest, flooding the market with coffee and driving down the price. You want to profit from this. So you borrow a bag of coffee from Jimmy, your neighbor.

4/ You sell the bag of coffee to Paul, your other neighbor, for $20, the price of the bag at your market. You now have $20 but you owe Jimmy a bag of coffee (you borrowed it, after all). One month later, the price of coffee drops 50%. You buy a bag at the local store for $10.

5/ You walk over to Jimmy’s house, hand him the new bag of coffee, and give him $1 as interest on the borrowed bag. So you sold a borrowed bag for $20 and then bought it back and returned it for $11 ($10 plus $1 interest). You’ve made $9 profit on your coffee “short” position!

6/ Of course, if you had been wrong and the price of coffee had risen, you still would have had to “cover” your short by buying a bag and returning it to Jimmy. You would have lost money. Because the price can rise infinitely (in theory), losses from short selling are uncapped.

7/ So this is a quick primer on the topic - Short Selling 101. I hope it was helpful! Disclaimer: Only experienced traders and investors should think about short selling as a strategy. Given the uncapped losses, it is inherently a more risky strategy than going long.

1/ The GSX Robo Army Chinese tutoring platform GSX Techdu is under fire, with the company publicly stating it is not a fraud after damning reports from @muddywatersre @CitronResearch @ResearchGrizzly. In this Friday Funny (alleged) Fraud, we cover $GSX. Who’s up for a story?

2/ Imagine you are the CEO of a chain of driving schools - DSX Drive. It’s a simple model - young men and women pay to come take driver’s ed classes at your facilities. Business is good, but certainly not great. The biggest problem? You’re not rich. But then, you have an idea!

3/ “Investors don’t love driver’s ed companies, but they love tech companies,” you tell your board. “We will become a tech company!” So you buy a domain name and create an online driver’s ed platform. You rebrand as DSX TechDrive, just to make it clear. You’re a tech CEO now!

4/ But there’s a problem: You don’t have many customers for the online business. Without many customers, there won’t be much revenue. Without much revenue, you won’t be rich. So you decide to fake it. “It’s just for now, to get things started,” you tell yourself.

5/ You hire a few shady characters to build robot programs that “buy” packages and “attend” classes. Revenues go parabolic (not really, but who cares!). You IPO DSX TechDrive. Investors go crazy over your revenue growth and tech-enabled business model. Finally, you’re rich!

6/ Your auditors either don’t notice or don’t care. Investors call you a genius. You start wearing a black turtleneck, of course. But the rouse begins to come undone. Skeptics surface, calling your business an elaborate fraud. “This is not a fraud,” you state defiantly.

7/ This is the, necessarily incomplete, story of the funny alleged robot-enabled fraud of GSX Techedu. Like Luckin Coffee, GSX is a US-listed Chinese business allegedly engaged in fraud. As a pattern seems to emerge, perhaps US regulators should be paying more attention...

8/ As this one is still a developing story, there may be further updates to come. Thanks to @muddywatersre @CitronResearch @ResearchGrizzly for publishing research on this incredibly funny (alleged) fraud. Stay tuned...

1/ Credit & Debt 101 There is so much talk of “credit” and “debt” right now, but as with most topics in finance, the discussion turns complex and leaves most people scratching their heads. What does it all mean? Why should you care? A quick primer on the topic...

2/ Credit is the granting of buying power. Debt is a promise to pay it back at a later date. Contrary to popular belief, credit and debt are not evil - in fact, they can be good! Whether they are good or bad largely depends on what the buying power produces in terms of income.

3/ Take a loan to buy a couch, that is bad. You won’t have income to pay off (“service”) the debt. Take a loan to buy a delivery robot who earns you money, that is good. You have income to service the debt. Income Growth > Debt Growth = Good Debt Growth > Income Growth = Bad

4/ Taking on debt is really just pulling forward future spending into the present. It reduces your future spending as you service that debt. If you are earning more at that future date, that is fine! If you aren’t, you may be unable to service the debt (a “default”).

5/ Economy wise, the key is that spending is used to fund productive activities that stimulate growth and enable us to service the debt. So what’s the problem today? Well in short, we have not been doing that. Since 2000, we have added $185T in debt to achieve $46T of growth.

6/ If that seems unsustainable, it’s because it is. At some point, that bill comes due! Sure, we could print more money (kick the can!), but eventually, if debt service costs exceed incomes, we are in trouble. These are the “Zombie” companies or economies you read about.

7/ Our global credit binge has set our course for a wave of defaults. This is a classic “debt cycle” and has repeated itself throughout history. We play with fire, get burned, then we do it again! So this is where we are and why it matters. This concludes Credit & Debt 101.

8/ For more on this, I recommend: The Price of Tomorrow (@JeffBooth) The Unfolding (@RaoulGMI) Big Debt Crises (@RayDalio) Thanks for the inspiration, gents!

1/ A Thread on Sound Money Imagine it is the year 2200 and you land on a tiny planet inhabited by friendly aliens. Walking around, you admire their incredible alien technology. You wonder aloud, “What is the basis of this thriving planet?” So you enter the market...

2/ The market is thriving. Buyers and sellers transacting with ease. But instead of the paper money you are used to seeing on Earth, you notice all transactions are being completed using small seashells. Curious, you tap an alien on the weird lump you think is its shoulder.

3/ “Excuse me,” you say, “But why are you using those seashells as money?” After it processes your strange language, it looks puzzled. “The ‘seashells’ you belittle are very rare, impossible to produce, come in different sizes, and are durable.” “Ah, sound money!” you reply.

4/ But suddenly, you hear a loud noise nearby and see another spaceship landing outside the market. The market gate swings open and who saunters in? None other than Mr. FEDerico, the man of endless means. He climbs the tower in the center of the market and clears his throat...

5/ “I have come from Earth and will buy your technology! I have 100 million seashells as payment.” (Seashells, of course, are easy to find on Earth, despite their rarity here). The market turns into a frenzy - sellers going crazy over the profit potential. What happens next?

6/ Mr. FEDerico zooms off with his technology, but not before he has inflated the seashell supply. With the massive influx, the value of seashells collapses. Savers are punished as sellers raise prices. The thriving society collapses. Without sound money, it could not function.

7/ As you wander around the now barren planet, you marvel at how quickly it all broke down. You hop back into your space ship, ready for the long flight home. “Aliens are wild,” you laugh, “That could never happen on Earth.”

1/ The Luckin Coffee Frauduccino The fall of market darling Luckin Coffee ($LK) following allegations of financial fraud has been swift. So in this edition of Friday Funny Fraud, we will cover Luckin Coffee’s Frauduccino (as exposed by @muddywatersre). Who’s up for a story?

2/ Imagine you are the CEO of a chain of ice cream shops - The NoLuck Creamery. You make great ice cream that customers enjoy. But there’s a problem. You’re not rich. As it turns out, ice cream is just another low margin retail business. But you have an idea to fix that!

3/ You’ve seen how the public markets value fast growing retail businesses, so you decide to take NoLuck Creamery public. But you’re not a fast growing retail business...yet! To fix that, you establish NoLuck Buyer and NoLuck Supplier - two secret entities, controlled by you.

4/ NoLuck Buyer buys millions of NoLuck Creamery gift cards. And just like that, NoLuck Creamery has revenue growth! (Well, not really, just on paper, but that’s ok, you say.) You place supply orders with NoLuck Supplier (fake ones, but it can’t look like pure profit, right?).

5/ Now to get rich, you IPO NoLuck Creamery. Investors salivate at your revenue growth and outlook. You sell millions of shares in the IPO. It’s totally fake, but who cares! You’re rich! “I’ll donate to charity,” you say, as you ride your Peloton in your new home’s zen garden.

6/ Sadly for you, the joy is short-lived. While your auditors didn’t out you (huh?!), short seller Muddy Waters Research did, spending hours in NoLuck Creamery and concluding your revenue numbers were fake. “Touché, Muddy Waters,” you say, “But try my Mud Pie, it’s to die for.”

7/ While simplified, this is essentially what Luckin Coffee did - secret entities, fake orders and materials purchases. It’s delisting time! Another irresistibly funny fraud. S/O to @muddywatersre for exposing this (and many other!) cases of financial debauchery. Hat tip!

1/ What is Fund Rebalancing? If you’re following financial twitter or the financial news this week, you’ve probably read commentary calling for significant selling due to “quarterly fund rebalancing.” But what does that mean exactly? Welcome to Fund Rebalancing 101...

2/ Funds (pensions, sovereign wealth funds, etc.) typically have a target portfolio weighting across stocks and bonds. Let’s say that target weighting was 50/50. You start a quarter at that level, but if stocks appreciate much more than bonds, you may be at 60/40 at quarter end.

3/ So to get back to your target weighting, you have to sell stocks and buy bonds. This groundswell can move markets. Given the appreciation of stocks relative to bonds in Q2, many expect this action to drive a wave of selling of equities. And that’s it. Fund Rebalancing 101!

1/ Is This a Stock Market Bubble? There has been plenty of talk calling our current market environment a “bubble” following its meteoric rise from March lows. I’d like to take an objective look. Let’s use @RayDalio’s “7 Classic Signs of a Bubble” as our framework...

2/ Sign 1️⃣ - Prices are high relative to traditional measures. This is a qualified yes. P:E ratios are broadly quite high, though perhaps misleading given the lack of forward guidance. Some valuation measures (adjusted for historically low rates) are more reasonable.

3/ Sign 2️⃣ - Prices discount future rapid price appreciation. Yes. There is a broad-based expectation of rapid, face ripping earnings growth (the “V-shaped recovery” everyone keeps talking about). We have severely contracted, but the market is expecting massive expansion.

4/ Sign 3️⃣ - Broad bullish sentiment. Yes. Stocks only go up! Equity put/call ratios hit historically low levels in recent weeks. “Stocks only go up” has become a mantra repeated by bloggers, tweeters, live-streamers and the media alike.

5/ Sign 4️⃣ - Purchases are financed by high leverage. This is a qualified no. Use of margin (i.e. leverage) has contracted on a YoY basis, though the data is only through April. Overall economy debt levels are ballooning, but we are just looking at the stock market for now.

6/ Sign 5️⃣ - Buyers have made forward purchases to speculate. Unclear and a bit hard to determine at a stock market level (vs. in individual industries like housing, etc.). The use of unemployment and CARES Act benefits to speculate in the markets tilts this one towards a yes.

7/ Sign 6️⃣ - New buyers have entered the market. Yes - no question. Robinhood has experienced a massive surge in new account openings, as everyone decides to try their hand at “doing the stocks.” Constant media reporting of the rush and returns further accelerate the trend.

8/ Sign 7️⃣ - Stimulative monetary policy helps inflate the bubble. Money printer go “Brrrrrrr!” Central Banks globally have taken dramatic, unprecedented steps to stabilize financial markets, including through lowering interest rates and massive direct purchases.

9/ So where does this all leave us? Based on this framework, it seems that most of the signs of a bubble either exist or may exist in the stock market today. This doesn’t mean that there aren’t opportunities (always money to be made!), but manage risk carefully as you proceed.

1/ Wirecard's WireFraud The fall of payments darling Wirecard ($WDI) due to allegations of financial fraud has been swift. I love a funny fraud, and this one is very funny, so I'd like to try to break down a simple version of what seems to have happened. Who's up for a story?

2/ You are the CEO of an Icelandic ice company - FreezeCard. Your business is pretty simple - you manufacture and sell bags of ice to retailers within Iceland. Business is good, not great - the market for ice in Iceland is ironically small. But then, you have an idea!

3/ You'll take FreezeCard global! Ice demand in Iceland is pretty weak. The world is a big place, and ice demand in hotter regions must be better. But it's hard to take a business global. How would you set up manufacturing, supply chain, and distribution? Why not fake it?

4/ You open a subsidiary in Dubai. No employees, no office, but FreezeCard Dubai is now official! You find retailers in hot locations, claim them as customers (they don't know you), and book revenues. FreezeCard Dubai suddenly has $100M revenue (not really, but who cares!).

5/ So now FreezeCard is global (kind of?) and you'd like to profit from that. You're a global ice kingpin, after all! You sell stock to the public, raise debt from institutions, and become rich. "I'll use my money to do some good," you say, as you slip into your new McLaren.

6/ Sadly, your wealth and fame is short lived. Those pesky short sellers and journalists, who you managed to keep at bay for years, catch on to your scheme and out you. You are ruined. "I guess this was all a melting ice cube," you say to your lawyer through the glass divide.

7/ While I'm certainly simplifying some parts of the Wirecard story, the funniest part is, according to the allegations, it was almost that simple. Fake customers, fake profits. A short seller's dream. My first "Friday Funny Fraud" story - I might have to make it a tradition.

1/ The Bankruptcy Ice Cream Truck There seems to be a lot of confusion about how a bankruptcy process works and how it impacts the various stakeholders involved, so here’s a simple analogy. Imagine observing an ice cream truck at a carnival on a hot summer day.

2/ It’s very hot and a long line forms. Everyone wants their fill of fresh ice cream. The Ice Cream Man pops his head out of the window and announces, “Sorry folks, I have a limited supply today. I don’t know how many of you will get any of my ice cream.” The crowd stirs.

3/ Those at the front of the line - let’s call them the Creditors - are more likely to get their fill than those at the back of the line - the Shareholders. If the Creditors are particularly malicious, they may even try to screw over the Shareholders by eating double their fill!

4/ Curious, you ask a few Creditors in the front how they feel about their chances. They appear to have mixed feelings about their ability to get their fill. These metaphorical front of the line “ice cream bonds” are trading at 50 cents on the dollar - unclear recovery of fill.

5/ But then you ask the same to Shareholders in the back, and they appear euphoric, convinced of their ability to get their fill. Maybe they are just more optimistic than the Creditors, you surmise, but if the front is skeptical, the euphoria of the back is clearly misplaced.

6/ “This all seems very odd,” you say to yourself as you walk away, “I’d rather have fried dough anyway.” This (admittedly simplified) analogy shows the surface dysfunction of some of what we are seeing in the markets today as it relates to bankruptcy. I hope it helps!

1/ A Thread On Perverse Incentives I posted yesterday about the slick move by $MRNA raising money on the back of their vaccine progress announcement. Incentives are everything, so I worried openly about the perverse incentives it highlighted. Well... https://www.statnews.com/2020/05/19/vaccine-experts-say-moderna-didnt-produce-data-critical-to-assessing-covid-19-vaccine/

2/ Let’s look at a simple story of these perverse incentives at play. Imagine you are a biotech CEO and are developing a vaccine. It’s not going well and you are running out of cash. More money might help, right? “Wow, Moderna played it well,” you muse. So what do you do?

3/ You issue an overly-optimistic, non-peer reviewed release on progress, of course. You need cash to continue working for the greater good, so it feels morally sound. Now you sit and watch as your share price soars. You go on @CNBC and @business for your victory tour.

4/ At market close, you announce a share offering. Naturally, this will be at your, now much higher, share price. “We need the money to save the entire world,” you tell the markets. You might even be inclined to sell some of your stock at this new share price. You deserve it.

5/ You might even tell your buddy on the WH task-force that he should probably divest his shares, as it seems like a real conflict (it wasn’t at the lower share price). You sit in your chair and marvel at your CEO superpower - a strong balance sheet and some $ in your pocket!

6/ So now we have a juiced balance sheet, a rich executive, and a public that is no closer to a cure. “Modern capitalism is bloody brilliant,” you might say, “I think I’ll go play 18.”

1/ A Thread on Markets It is the year 1500 and you enter a market in Renaissance-era Italy. There are buyers and there are sellers. Prices of the various goods are determined by the interaction by and among these individuals. Now in walks Mr. FEDerico, a man of endless means.

2/ Mr. FEDerico climbs a tower in the center of the market and proclaims, “I am a buyer of any and all goods in this market, regardless of their price.” He climbs down off the tower and exits the market to return to his mansion. What happens in the market when he leaves?

3/ Sellers, knowing they have a buyer, increase their prices. Buyers, previously unwilling to pay these prices, realize they can flip and sell the goods at a higher price, so increase their bids. Even you, the silent observer from the future, are tempted to get in on the fun!

4/ The fun continues for a while. Buyers and sellers flip goods at higher and higher prices, turning profits as they do. Wealth accumulates. The poor and middle class are forced to go to a market several cities away. They can’t afford to pay 5000 Florin for a bag of corn...

5/ But one day, Mr. FEDerico returns to the market, climbs the tower, and proclaims, “This market is incredible, bustling and vibrant. I am no longer needed and will move on to new cities in need of my brilliance!” What happens next?

6/ Without a buyer at any price, sellers frantically try to sell. But buyers are silent, and prices plummet. Back in your time machine, you see the irony - Mr. FEDerico never actually had to buy anything, only his intention to do so. “History is wild,” you say, “I prefer 2020.”