Brunch & Budget

b&b240: Gamestop, Short Stocks & the Smoking Barrel

February 06, 2021 Brunch & Budget
Brunch & Budget
b&b240: Gamestop, Short Stocks & the Smoking Barrel
Show Notes Transcript

So what’s going on with this GameStop thing?
Did Reddit take down a multi-billion dollar hedge fund?
What’s a hedge fund?

If you’ve been hearing about GameStop nonstop for the last few days and want to know all the drama and what it might mean for the stock market as a whole and your personal investments, join us today at 2pm EST to learn all about it. We invited back Kevin Matthews of Building Bread to help us break down what the heck happened, all the investment terms you need to know and discuss the cultural and economic significance of this event.

Music Featured in This Episode:
Sol Patches-Gamestop by Ians Party
Stock Market by KIDD ISAIIAIH &and  PERK
Grandma Got Run Over By a Hedge Fund by Live From Indoors!

Dyalekt:

When you're balanced, it feels like it's pushing a boulder up the hill and you're looking over your shoulder because creditors have no chill and they're lying to you on social you're just looking for something real from a rock for brunch, your budget will keep you on even keel. This is a bunch of budget podcasts a show about personal finance and racial economic inclusion with your host, certified financial planner and accredited financial counselor to take the bite out of your budget. your budget is part of the reason well podcast. I'm your sound provider dialect and here's your host, Emily.

Pamela Capalad, CFP, AFC:

Thank you die like I love that new intro.

Dyalekt:

Actually just like like mostly pre started on the first day and then I'll keep that I keep like tinkering with every time I mess with it.

Pamela Capalad, CFP, AFC:

I'm like, feel so fresh and new. It's the new year.

Dyalekt:

New Seasons like vaguely a new season. Yeah,

Pamela Capalad, CFP, AFC:

it's okay. It's okay. We got lots to talk about today though. Oh my gosh, y'all. I don't know if y'all have been paying attention the last week at what's been going on with GameStop with hedge funds, with things being shut down. Investors being shut out where am I? Oh, because the Rebel Alliance book The Deathstar. Just for a little bit, just for a little bit. That's right.

Dyalekt:

I mean, well, they always got another desktop. That's that's the big thing. But yeah, there we go. Fantastic guests.

Pamela Capalad, CFP, AFC:

And repeat guests. Kevin Matthews. Let's put him on.

Dyalekt:

Yeah, Kevin. Here we go.

Pamela Capalad, CFP, AFC:

Here we go. Hello. Hey, Oh, my gosh, thank you for being on. We literally asked him I think on Thursday, if he could come on today. I was like, please, please, please, if you can, again, if you can't, but oh, my God, this is big. Well, yeah. I

Dyalekt:

mean, there's a whole bunch of other stuff we wanted to talk about. But this GameStop thing. It's big and sprawling. And there's a lot of details that we want to know about, because it has a lot of it has consequences if you're already invested. And also if you're not, my tween cousin just hit me up was like, I want to start investing in the stock market. What

Pamela Capalad, CFP, AFC:

do I do? It's like, did you see GameStop? Also?

Dyalekt:

Yeah, that's what it was. He got hired. And I have to unpack with him. What are the reasons he typed? Is he like wanting money out of it? If you want justice out of it, because there's a lot of angles?

Pamela Capalad, CFP, AFC:

Yeah. So thank you for joining us and taking it tell us what the hell happened? Yeah, it is. It's a wild story. I'll start by saying that the technical term is a short squeeze. And to explain it, I'm going to try and use a metaphor actually heard this metaphor yesterday. So it's relatively new, but I think it actually works. So as you can see that like has this amazing jacket on. So imagine, imagine that you go and I find that I target and target says, look, you can sell this jacket, you can borrow it from us. So we're borrowing this jacket, you get to sell it at 100. And when you bring it back to target, you only pay target $5. Right? Great, I get to borrow this jacket, I get to sell it high. And I get this return for $5. Perfect for me, right? What happens though, if any celebrity starts to wear the jacket, and now target says you can't pay us $5. Now it's $200. Now it's $300. Now it's $400. So if I borrow that jacket, I need to like buy more things. This is really terrible for me. So I will lose money. So in this instance, the person who bought the jacket is the hedge fund, they got squeezed. So when the jasmine was $5, regular investors like us to look, I actually like that jacket, I'm going to bid up the price, I want to buy GameStop now. And as that price starts to go up, it went above the $100 mark in this example, and hedge funds that look, now we're losing money, now we have to buy it back, and the price kept going higher, and higher and higher. So basically short squeeze is when anyone borrows the stock, they wait for the stock to go down. They sell it and they give those shares back to the people they borrowed it from.

Unknown:

Gotcha. Oh,

Pamela Capalad, CFP, AFC:

that's a great analogy. And

Dyalekt:

one thing about that, I mean, a couple of details are different. But listen to it from that angle. That often sounds like the same way a plug will will squeeze a dealer when we're talking about the drug game. I just want you know, as we're making analogies to, you know, harmful systems, that folks who can get some short term gain

Pamela Capalad, CFP, AFC:

the money and say like,

Dyalekt:

you know, if it gets in the market where you're at, they're like, Oh, they will saddle you with more weight. And be like, Oh, you can do that? Well, let's do more on that. And like put setting them setting them up for failure.

Pamela Capalad, CFP, AFC:

Right? Right. So similar. until until you can't do it. And today, because you thought and most people would think the same thing. Like a lot of people. I'm probably in this boat too. I probably see GameStop is more of a blockbuster. No one would expect blockbuster to return or rise in value. So hedge funds like this is a safe bet they were down 77% last year, until a few weeks ago if they're like yeah, I mean, it's like blockbuster. Of course we're gonna make money as it goes down. But then people started to figure that out. They over extended themselves on Barring those shares, regular people like us figured it out. And we said, Look, we can get back at hedge funds, we can get back at the man and we start to bid these up. And that's exactly what they did. Wow. I mean, it's still playing the game, right? It's still playing by the rules.

Dyalekt:

And the Mercosur thing is a really good example. Because I remember when blockbuster went down, people were happy about it. Because people didn't like blockbuster. They were tired of like how blockbuster got rid of their local business and all that, but GameStop have that kind of baggage. People still had love for GameStop. It felt like one of their own. Yeah, I feel like that might have had a little bit of difference in terms of the public sentiment?

Pamela Capalad, CFP, AFC:

I think so i think so that's, that's a very good point, I'd have fond memories of my GameStop around the corner, as well, except when I was trading my games, and

Dyalekt:

we play rap songs that pertain to the subject matter. And I actually found a joint where there's cat with disengaged stuff, he actually used the beat from ether talking about how low rates they gave you when you tried to sell your games back. so mad about it.

Pamela Capalad, CFP, AFC:

So this really came from Reddit, right? This came from Yeah.

Dyalekt:

It was organized, organized, and say about Reddit, like stuff like springs from it naturally. But like those people who curate anything organized

Pamela Capalad, CFP, AFC:

and curated because it's not it wasn't just GameStop. It was GameStop. It was AMC, I saw they had Nokia and a what was a blackberry? Yeah, that was the other one. Because I feel like the big news that happened last week, too, was so the GameStop stock was you know, going up and up in value in these hedge funds are having a harder and harder time actually buying them, right? Because I feel like that it was it sounds like it was a supply and demand issue too, right of like, hey, only so many GameStop stock around now it's getting even more expensive, and more and more people are buying it. So these hedge funds who borrowed the GameStop stock ahead of time have to like buy them back. And it's like, Where are they? And when they're there. It's like so expensive, right? So Robin Hood was the first to do this. They stopped allowing you to trade on their app, right? They stopped allowing you to buy GameStop

Dyalekt:

Yeah, well betrayed man. Like how was Robins? You gonna play like that? That's like, well, Scarlett, who's the one that stabbed you in the back?

Pamela Capalad, CFP, AFC:

Yeah, for real?

Dyalekt:

Do you know your Robin Hood? mythology?

Pamela Capalad, CFP, AFC:

Yeah, I mean, Robin in the poll that move, no one I know is happy about it. If that weren't the only app to do it. However, when your name is Robin Hood, you really can't do that, number one. But also, their explanation was really, really vague. But they also have some what I would consider conflicts of interest, because Robin Hood is expected to go public this year, they want please, a lot of these high level ambassadors and hedge funds. The money that a lot of good chunk of money, I've seen more than $100 million that Robin Hood makes is actually from the same research firm, and they sell the data. So if you're an investor, they actually sell that data to I think it was Citron research was the name of it. So there's a there's a big conflict there that isn't always disclosed. So when they said, we're not gonna allow people to buy it, the CEO came out and said, Well, it wasn't a liquidity problem, which means they didn't have the cash on hand. And he said it wasn't a regulator problem. So that to me says, you made that call for it. You know, it's not great, but like I get it, right. No, he said that was it. That was a personal call. Yeah, business call. Yeah. That wasn't good. It's really it hurts retail investors. Because if hedge funds can make money, when a stock falls, they use the exact same concept, except we're the ones who who won in this example. And they came off and unplugged it all together, which I think is really a terrible. Yeah,

Dyalekt:

I also wanted to shout out when I was looking over at Wall Street bets, just give him props to the community that they have their Reddit, some folks were talking about how when Robin Hood goes public, we should in mass short Robin Hood, and then what happened right after that is they were like, Well, hold on, because then they'll probably do to us what we're doing to them right now. And they started having a whole deep discussion, breaking down what their actual options were. So I just thought that that was beautiful to talk to each other like that.

Pamela Capalad, CFP, AFC:

Yeah, yeah. Yeah. And now Robin Hood's getting sued. Right. There's a Yeah, action lawsuit. File immediately. Yeah, I know that. They back up. They This is not the first time. So Robin Hood has had some some issue just on their platform way before this. So in 2020, January 2020, they had some glitches that wouldn't allow people to trade just because their program didn't recognize the date. 20 2009 Yeah, when the market failed last March, they had some outages and people weren't allowed to buy and sell back then. which is which is crazy, right? Like, you want to do something about it. You cannot do it and Robert and I happen to Well, that seems like way too convenient timing to for those glitches to happen. Yeah. Okay, so they've been having issues. Yeah, cuz the thing is, and this is why I'm always suspicious of anything It's free when it should cost money right in to trade stuff costs money, right usually pay commission, a lot of places were able to discount it, they ended up being called discount brokerages. Because before when you had a stock broker in the 80s and 90s, it was really expensive, right? It may cost like 8090 $100, just to like do a trade. So really wealthy people could do it. And then when these discount brokerages came out, Schwab was probably one of the bigger players, it only cost like eight 910 dollars to do a trade. And then it got cheaper and cheaper and cheaper as technology change. And I remember when Robin Hood came out, and they're like free trades, no commissions. And I was like,

Unknown:

oh, hmm.

Pamela Capalad, CFP, AFC:

That's how you make your money, though. Yeah, so they

Dyalekt:

got us, right. I remember throwing parties, and it cost me money to print up flyers. And I had to run around the city, putting them down. And then my homie came and did a show with me and brought twice as many people with Facebook. And I was like, we'll just do that. And we didn't even think about what we were giving up. Yeah.

Pamela Capalad, CFP, AFC:

Yeah, I mean, that's, that's the thing, anytime there is something for free, there is a cost, or you realize that you are the product. And that's exactly what happened. They use that data, they sell it to whomever one of the research firms are part of that. And they do whatever they want to do with the data. So that's, that's a part of it. So we have to be? Well, first, I think Robin Hood needs to be a lot in all apps, really, he'd be a lot more transparent about here's exactly what we use your data for. And don't stuff it in the terms and agreements where you know, I'm not going to read it, put it in a plain text where we can all understand and, you know, agree or disagree about whether or not we want to do that.

Unknown:

Wow.

Pamela Capalad, CFP, AFC:

Yeah. Who? Okay, so to take a step back, or just like come back to the current events? What practically happened to people who did put money in GameStop? Right? put money early on, who put money now? Like, is this something where if we can buy GameStop, we should go buy GameStop? Now like what is the what is the like implications of this for like, someone who is, you know, looking at and saying like, Oh, she I should have gotten the game? Or is it too late to do it now? So so to go back and context, back in December GameStop was all $4 per share. That was $4. No one was talking about it. Nobody thought about it. It got as high at one point as $500 per share.

Unknown:

Oh, my God.

Pamela Capalad, CFP, AFC:

Yeah. So right now, it's at 325, which is an extreme profit. Oh, the Now the thing is, past, you know, past performance and predict future results. So 25, there's no guarantee that it's going to continue to hit that level or not, we don't know. But for someone looking in now, you obviously want to really, really assess your risk, and see if that's something that you want to do or not. Personally, I'm not a huge fan, I'm not investing in it right now. And don't plan to just because that's just not my cup of tea, because I don't like it when it drops. We've seen some extreme drought, for example, we've had days where it's been up 135%, we've seen days where it's down 70%. And if you're not used to that, you may not be the right candidate for it. So just want to warn people about that. But yeah, it's that's, that's the type of profit potential I've seen. I've seen people put in 10s of 1000s, and walk out millionaires. I've also seen people do the opposite, where they put in 10s of 1000s. and walked out with nothing because of the way how quickly things move. So do very, very careful, assess your risk, and then decide with the help of your accountant because you may pay taxes, or you're a financial planner, decide that's the right thing for you to do. Hmm, yeah, cuz this I mean, the way you describe it one sounds like gambling, right? You're like literally taking bets and also like day trading, right? You're like, yeah, definitely is. Yeah. The other thing I want to point out is not necessarily the short squeeze, but we've seen stocks shoot to what they call the moon, and the crash shortly after example, tilray in 2018, that went It was a short squeeze within weeks, $20 all the way to $200. And then before the end of the year was down to 70. Today, two way is not even $20 a share. Wow. How quickly it just it blew up into Spanish Kodak last year did a very similar thing. If you guys remember that sort of 15 100%. Within three to four days, it was back down. No one knows where Kodak is today. Right? So I these things do happen. But unless you just happen to have gotten lucky. And I've been in very early. It's hard to chase after the fact. And it can be very dangerous if you don't manage risk.

Dyalekt:

Well. And that's why this isn't the you know, when we talk about risk, it's not the colloquial meaning of risk, like, yeah, I think a lot of people when they think about risk, they're like, yeah, there's risk but if I believe in myself, I can achieve and push that thing farther than you know moms can lift cars off the babies and stuff like that, but that'll have nothing to do with me. What happened to

Unknown:

that stuff?

Dyalekt:

I don't you don't even know why it dropped off the map. You have

Pamela Capalad, CFP, AFC:

no right right and so it's a difference it had nothing to do with me you know? Never like I'm not taking the final shot I'm just whatever happens happens and that's that's a different story so you got to be careful what got you okay that's super helpful I want to go to a song now let people if you have any questions please leave them in the comments please follow Kevin at building bread on all the social media platforms. And the thing I want to come back and talk about is like what is the larger implication for the stock market as a whole if you do have money in investments this affect you in any way all of those kinds of things? Because and also what does this mean for wall street right? What does this mean for the way this was handled? What does this mean politically?

Dyalekt:

Yeah, we'll be back in a moment on the live when we plan these songs. This one is a little bit long as a few minutes but it is a really good one your intro is long so I'm gonna move on through it's from this collective called Ian's party of Chicago Illinois, the crew is called soul patches and the song is GameStop and it's a really just nice journey as some kids who like to hang out at gamestop and how it makes them able to get through their daily life

Unknown:

a piece of my daily armor brought down by the waves of my daily trauma I came up with the black cruising down the street plan Nintendo 64 on the PlayStation two Tony Hawk cuz when it gets dark to K covers, NBA and ladnier ever tested in the fab when you look at North math my job night night so because the street lights so run to your home just write these poems I've been writing flows I've been making goals I suppose I've been no no road I've been writing flows as you find in the corner change when I got the

Pamela Capalad, CFP, AFC:

Lincoln rubber fast as blasted Thank you have a memory slang again like less than machine level three and Beverly

Unknown:

Beverly entertainment. I love

Pamela Capalad, CFP, AFC:

love love all the cases are prepared for me love when piling piling down this best way I love

Unknown:

games played is win the game. War has changed. It's no longer about nations, ideologies or ethnicity in the theories of freedom, a mushroom kingdom and F 12 network cooperating operating as a nation We call it the PlayStation. The whole world is a playground for the whole world when a state house the whole world, the whole world and much, much sooner versus a game.

Dyalekt:

I wasn't playing with y'all when I was saying that. This is one of my favorite joints don't just because we really play a lot of really great joints here. But this one is not only a dope song like great, the crate flows really interesting concept. But like really, this came out a couple of years ago, something from 2018. And it really encapsulates the thought process that led to this situation. There were an entire generation of kids are like, I go to my nine to five and it's awful. And you know, they even hit there was a lot of news talking about you know, at night in Chicago, you know, folks are getting shot outside. So we stayed inside playing our games, doing our thing like that, like the way that this gave these kids catharsis so they can live their life, and then how at the end, like, I remember, I was like, oh, maybe I should cut off this end part because it is a bit of a long song. And wow, they were like it's a whole different world in the way we see fights and overcoming and making things for ourselves and building community. Yeah, the soul batches. The rest of the songs we got today are really great to know. You're steady though. They're also read old songs, but it just really hit me in this special place.

Pamela Capalad, CFP, AFC:

Yeah, well, and this makes me want to read a wall street beds post from one of the people who were part of the early organizing or like who got involved in the early like firing of Reddit, he wrote this is for you, dad. I remember when the housing collapse sent a torpedo through my family. My father's concrete company collapsed almost overnight, my father lost his home, my uncle lost his home, I remember my brother helping my father count pocket change on our kitchen table. That was all the money he had left in the world. While this was happening in my home, I saw hedge funders literally drinking champagne. As they look down on the Occupy Wall Street protesters, I will never forget that my father never recovered from that blow. He fell deeper and deeper into alcoholism and exists now as a shell of his former self waiting for death. This is all the money I have. And I'd rather lose it all and give them what they need to destroy me, taking money from me won't hurt me because I don't value it at all. I'll burn it all down just to spite them. This is for you to add.

Dyalekt:

And that's not the only one I've seen. I've seen tons of these. And there was one that really struck me about how what do you think I care if I have $10 in my account or $110? In my account? It's really the same either way. I've never had more than 1000 My Account like these cats Really? on principle has been really impressive.

Pamela Capalad, CFP, AFC:

Yeah, yeah. And if you're just joining us, we're here with Kevin Matthews of building bread getting deep into the game stuff. thing that happened last week, the Game Stop, you know, retail investors taking down they didn't even take down the hedge fund hedge fund lost $5 billion. But it turns out, they're still worth a billion dollars. So I think they're gonna be alright.

Dyalekt:

Yeah. I don't know if people expected that to happen. It's like Bad News Bears and other like, you know, your sports movies where it's like, We're not trying to even win the championship. Rocky lost it, you know, Rocky, but it was still beautiful, because, you know, he stood up there and took the punches and stayed up. aliases. I mean, we teach that with our education work, you know, financial resilience and resilience is such an important, beautiful and connectable human trait.

Pamela Capalad, CFP, AFC:

Yes. Yeah, exactly. Exactly. So can we talk a little bit more about kind of what the bigger implications are for something like this to happen? Like, yes, people made money off GameStop? Yes. You know, we stuck into this hedge fund this one time, and the way that wall street reacted, how quickly they reacted, I feel like tells another story, too.

Dyalekt:

One of the things I just want to say to our listeners, since we're kind of doing this new format and getting used to it, by the way, you can throw in questions in chat, and we'll answer them to the best of our ability to answer them to the best of his ability. So feel free if there's anything confusing if you want more clarity. Yeah,

Pamela Capalad, CFP, AFC:

yeah. So we're asking for bigger implications.

Unknown:

Yeah, yeah.

Pamela Capalad, CFP, AFC:

What does this mean right, is this you know, this isn't the first time a short squeeze has happened. You mentioned them before, right before the in the last segment, but like, what is this mean in terms of like how Wall Street reacted to and what kind of actions they took to stop this essentially from growing? Yeah, so I think there's a lot of different angles. So first, I think this is good for everyone. In that we now the average investor has some sort of retaliation or tactic we can use to say Look, I don't like what you did. So if I'm not going to bankrupt the entire fund thing, so I do like that because Occupy Wall Street someone said wasn't effective only language they speak is money though least we have some weapon in our toolbox say look, you know, I got the money to spare. I want to make sure that you guys feel I do like that. And I think that are I hope that while she is next Now look at that and say, Okay, well, maybe I don't want to be as risky, I don't want to make these certain moves, because now I can be attacked, if you will. Just that's the one thing I do. I think Additionally, we have to look at how we move forward as investors and one of the things do we decide to do and how we can collect together, because the good thing about I wouldn't say revenue, per se in this in this context. But the good thing about increased access and organization is that we did not have this capability in 2008, we didn't have in 2000. Now we do. And we have millions of people who did not have access before, we can use the same organizing tactics, and all types of movements going way back before the Civil Rights Movement to now say, now we have a financial revolution. And we do have power, and we're able to exercise that power. So I do like the fact that it did happen. I don't like the fact that they cut it off like that. That was not cool. I think that's where the the now the changing price is going to be around regulation around who can cut off what and why. And hopefully, the lawsuit goes in our favor. That's the next part of this is how do we ensure that the game is not rigged in such a way, we don't have the same tools and same access to tools?

Unknown:

Huh, you have any outcomes

Dyalekt:

that you're hoping for, like one thing that I was thinking, and this is like my personal feelings, because I think short shorting stock is awful. The fact that you can do it to me is so like, one thing I'm thinking about in terms of regulation, if it just becomes more difficult or less likely that you can short a stock, I would be happy. Do you have any like goals or things that you would love to see happen?

Pamela Capalad, CFP, AFC:

I'm not sure. Yeah, I think I still need to kind of think on it. I think for me, I want more more clarity and disclosure. So like, how does Robin Hood make money, I definitely want that I want more education, as always, for all investors. And I want us to understand how hedge funds work and how integrated they are in our financial system. Because, as mentioned, I've said this on Twitter, like, we definitely have a depiction of what hedge funds are and what Wall Street does and how they hurt us in the past, I totally get that. And that is 100% true. Wall Street sold. So all of us terrible loans are at home, and they make money when it fell and put people into bankruptcy. Or if the buyer the jobs took their homes back. And that was awful. And they made money. In both instances, they made money when they sold it alone. And then they knew the loan was bad, you lost your home, they made money that way. And that was trapped. These people, a lot of them. This is their retaliation for it. However, hey, the biggest customer of hedge funds aren't just billionaires. They're pension funds. So teachers, state workers, I worked in the city in New York, like I had access to a pension. Now what right, so we got a we got to understand the entire cycle of the system and put blocks in place and have various to say you can't do X, Y, and Z. And these things need to be disclosed. Now. Last part, I would say is the way in why hedge funds were created. So I'm not 100% sure. I don't like the thought of short selling by understanding it if I know blockbusters going down, it's not that's just how it went. They didn't move to do that. And if certain things happen, so in my opinion, right, I want I need to be safe, regardless of what happens in the market. And that was it. That was the theory. So if a stock falls, or if the economy falls, at least our pension is still safe. That's why they created it. Well, opposite side of it. If you're betting for a company to fall, you're also betting that people lose their jobs. Yeah. Weird. It's a weird cycle, that it's really hard to kind of pick and choose because if they fall, and I don't get to, I hate to say if I don't get the benefit from it, that also was my pension. So it's like, it's a weird,

Dyalekt:

it's great that you bring that up into like moral equivocating, because a lot of people are like, how dare you do this because you're gonna hurt pensioners. But as you're saying, you know, a pensioner where you know, whether they know it or not. They're enjoying their stuff on someone else losing their livelihood. So

Pamela Capalad, CFP, AFC:

yeah, no, one both sides. Well, I guess my I'm wondering, too, when it comes to putting risky things in pensions, pensions or me study pensions are meant to be steady growth. Like if you couldn't achieve the same thing by traditionally investing in stocks and bonds and having the right mix of stocks and bonds to make sure that it's protected there, versus like putting in something that has high fees, that has a lot of risks. That is not something that the average person would understand. Right? So you have like, the hedge funds selling to the pension manager who's selling to like, the HR person, right? At like us in a city office, right? Like there's so much lost in translation. My baby's giving me a kiss. There's so much Lost in Translation there in terms of like when it finally gets to the person who's making the final decision, like how do you protect, how do you protect people on that level?

Dyalekt:

It sounds like it's kind of similar, like it's basically the sweatshop labor thing but you know, even more definitely, just You know, like you buy your sneakers, you know, you're just being told, like a quality product. They put a commercial and all that. And it's there if you really dig, but you have to make the first step and dig.

Pamela Capalad, CFP, AFC:

Yeah, you got to dig really hard. And I think that's, that's why this closure part comes in. Like I should be able to know if I have a pension. This is where my pension is invested. Here's the address or the phone number, I need to call for questions. When weighing in to a put it in language I understand like, Well, part of how they get away with a lot of this stuff is this stuff so far deep into all the disclosures and takes a law degree, which takes student loan debt to even understand we got to be a lot more clear. And if you can't explain it in a clear way, then maybe you don't need to be doing it and don't make your money selling it to people who don't understand it. And that goes right back to loans back in 2008. Right. Right. Well, and when did pensions start investing in hedge funds, right, because that wasn't always the case. Yeah, I don't have an exact date. But I do know why. So today, like finance, finance, in general has gotten way more complicated in the last 20 or 30 years than it was before. I our parents could have got one job. My dad's a firefighter, he pretty much had one job for 20 years. That was it he retired pension. That's That's it,

Dyalekt:

though, that when you're a firefighter, you definitely have two jobs. It's the fighting the fires and also taking the calendar.

Pamela Capalad, CFP, AFC:

But on top of that, but that was that was it like you You really didn't, you know, financial planning was important, but like you got a salary for the rest of your life. Yeah, you were getting. But companies and states to a degree have started to phase it out because people were living too long. And we mean that now we got grandparents who are, you know, hopefully 80s 90s. That's another 20 or 30 years that that these pension funds now have to plan for? So I'd say look, the low risk stuff that we had, is not going to cut it for your entire life, we have to do something. And their answer right now is hedge funds. So regardless of where the economy goes, we got we're taking enough risks, hoping to get the type of retiring to make sure that your pension is guaranteed. So that started to happen. Again, I don't have an exact date. It's happened more commonly now the way they did 20 years ago. But that's how that's kind of how we got right. Yeah, I yeah. Cuz I feel like, wow, I mean, that doesn't make sense. I think that's why Social Security is getting squeezed, right? We hear about running out because they were anticipating that they're gonna have to pay people for maybe five or 10 years and are living longer people are having whole other lifetimes of money that they're supposed to get paid out to. So what do you do right? If you're a pension fund, and you see that number dwindling, and you didn't plan for all these people to live as long as we are which is great on one hand, well,

Dyalekt:

then it can people y'all should have shorted wholefoods way back in the day.

Unknown:

shorted Whole Foods

Pamela Capalad, CFP, AFC:

should have been. You were so shocked you like

Dyalekt:

Monsanto. General assess

Pamela Capalad, CFP, AFC:

me. Yeah. But like, it's forced people to take on more risk. But even going back to financial planning side, like, because companies started to realize this and said, Look, this is too expensive for us to give you 30 whole years of Amish filled rescue, like when he was just like five or 10. They said, Look, we're not gonna take the risk, we're gonna give you a 401k. And that responsibility is on you. If you don't do it, that's not on us. And that's what we had to start hiring financial planners. And that's how Robin Hood came up. Because now I was like, Well, I have to manage it on my own. Now I need to learn about the stock market. Now I need to learn about index funds. Now I need to learn about hedge funds now. So that's, that's how the entire psychology change. We started living longer. And people started to shift risk from the companies and these institutions and so security to the individual. It was good enough for everyone. We could all just live fine. No one would care. Why would I invest? Like I saved my money? And I'm, I'm good, but all that stuff started to change.

Dyalekt:

Wow, that's a really important distinction because a lot of times right now especially and in the stock market in general people talk about free. Man, I think it was like the times when like the big YouTubers like these greedy kids who are bored, but for a lot of this, it's just No, we're not greedy. We're just trying to get to sea level.

Pamela Capalad, CFP, AFC:

Right, right. And they changed what level sea level was in the last like two or three decades, right? Yes, yeah, there you go. It's affecting everyone everywhere. No, but they really they they changed the game already for us by taking away pensions and didn't know how to make up for the fact that we were living longer so they're like, well, now it's on you too bad. You're living to 100 right. Now we have to figure out other things I think about this all the time about like how my job as a financial planner like didn't need to exist 30 or 40 years ago and it exists now right and is the gold back to the point where everyone is making enough money everyone is able to save it Never thought about it that way of like, we have to learn how to invest now, because we have to be the one who's making those investment choices ourselves. And we're just kind of left to figure out how to do that. Whereas more like, my parents never had to learn how to do that.

Dyalekt:

I mean, we did the first investing one where I was like talking about how I don't really like the stock market, I've never been done with the stock market. And my conclusion was, I need to invest a relative My money is not going to beat inflation.

Pamela Capalad, CFP, AFC:

Right? Right. I mean, because the way I The way I see it, the way I've started to view more investing now is somebody has to go to work at the end of the day, is either you or your money. And I would rather send my money to go work at the stock market or wherever, so that I can sustain my life and do what I want to do. But again, because of the way that responsibility shifted, now, I have to be unnecessarily investing expert, but you do need to know your your risk tolerance, you do need to know how much did you have in stock? How much do you have in bonds, or hire someone to help you to understand those things. But again, like like my dad has not invested in that stock in a day in his life. I'm trying to get him to just just to understand it, but he didn't have to be. And the other thing is, with the how expensive student loans have become and how high housing prices have become, we're kind of forced to do it now. Because again, like my dad and has two loans that they have to pay for. Right. So I now have this debt. Am I getting paid too much? I got it. I forgot something to kind of make up that gap. And that's, that's a part of the bigger systemic issue. Yeah. So I mean, what do you tell people who are listening to this? Like, maybe I have a 401k? Maybe I don't, I am afraid of investing, or I fundamentally believe that it sucks or that it shouldn't exist?

Dyalekt:

Like, I'm 41 K and sort of I have no idea whether or not I have GameStop in there, right?

Pamela Capalad, CFP, AFC:

Like, how did this affect me? And like, how much do I actually need to learn about this to really be okay. Yeah, I would say go to brunch and budget. That would be your number one stop. Additionally, I think I wouldn't say for the average person like this, this was so far isolated incident, I don't think anyone's pension is at serious risk score arm at the current moment. So do realize that this is right now an anomaly. I think learning how to invest is very important. I think most people can get by by learning the basics. You don't have to get a degree, you don't need to be an expert. And more importantly, like investing is for everyone, and how you invest in what your style is, is going to be completely up to you. But but start there start to pick up little tiny things, speak with an expert if you can, and you want to start to make decisions from there. It's gonna feel complicated at first. But again, it's like driving a car. I don't need to be a mechanic to drive a car. I don't need to learn how to fix a flat. Is it helpful? Yes. But for you to get from point A to point B, you just need to learn how to drive and that driving process is a lot more simpler from building the car from the ground up. Yes, no, I love it. Well, and I'm it sounds like to that like this particular incident in terms of like your finances like, was for most people, it didn't affect them at all right? You missed the GameStop when it was early, you missed the GameStop stock when it was early. You're not going to buy it now because it's too expensive. But it's not what we normally talk about with investing is like for a lot of heads, if you're planning not to take it out for another 10 years, then this is just a blip.

Unknown:

Right?

Pamela Capalad, CFP, AFC:

Yeah, it's not the exact equivalent, but it's similar to like Kodak last year, like, like what? Or tilray where I mentioned tilray like, Oh, yeah, yeah. It was a cannabis company that was brand new at the time. Back in 2018. People were buying kill tilray, Aurora cannabis Adele was, we was gonna be legal. So everybody was pouring into those stocks. At the time, it didn't happen, and it just vanished. No one paid attention to it. So it is very similar to this where like, you know, I think this is really notable, but six months from now, depending on what happens in 2021. It'll all be on the bridge, and no one really remembers. So it depends. But also for for new investors. Everything doesn't have to be a lotto ticket. I think a lot of people are looking at like, if I if I get into this now I can be rich on student loans, and everything will be great. Which if it happens, that's awesome. Right? But everything isn't isn't like that. There are a lot of there are millions of other investment options out there that can still build wealth over time, but you don't have to get it all in one night. And I think that's that's the the warning and the caution that most people need to be

Dyalekt:

aware of. I love that. Can you elaborate a little further for the first time investor who's like, I have a couple of 100 bucks. That's it's not my savings. I actually put it away for this. And I want to start having some kind of investment in my life, but I don't know what to do. And this seemed exciting. What should I do first?

Pamela Capalad, CFP, AFC:

Yeah, so your first thing is, is to learn. That's your first thing. Now if it's, you know, you said you put it away specifically for this. That's good, because you don't want to start to invest with your savings or with something that you actually need. So always have those two buckets. I think that's extremely important too because we will look on this form, they say, oh, such a such put in $10,000. You don't know that was everything they had, you don't know if that was just a penny to them, you have no idea. So you want to be very careful that. But again, the first part is to learn. So learning and forums like this learning on Instagram from qualified experts about what investing is and how it works is the first step number two, my big thing is is learning how to practice investopedia has a paper trading platform, it's a simulator, and it tells you if you put in $200 in this stock, you put in $100 here's what would have happened over the last five days. That is extremely important. Because once that $200 have gone, you're not going to get it back. So hopefully it goes well. If it doesn't, at least you've learned in a safe environment. I think that is extremely

Unknown:

Hmm.

Pamela Capalad, CFP, AFC:

I love it. Yeah. So practicing is great. And then and then also investing money that you feel okay with not even necessarily losing but feel with like the money of value going up and down. Right? Yeah, yeah. And I would I would say this because I don't like phrasing it that way. Because it makes it seem more like gambling, right? I would say that you have time to allow it to grow. Because on average, if you hold a stock for a year, on average, it's like a 79% chance that it's going to be positive. After that year, that's going all the way back to 1950. So that means if I if I left it alone, there's a 70 chance I'm going to be okay, I would have made a game. But if I started to say, Well, I want to do it for you, I want to do it for a day or a week that that likelihood is a whole lot smaller. So the longer you hold it, usually the higher your chances of gain your chance are of a game three years 89% I think five years above 90%. It doesn't mean like, Oh, I can just hold this and do well. And again, it's on average, not every stock ever. Right. Right. But yeah, so like, know that the long term game tends to be a lot more profitable for most people. And it doesn't have to be like this. The super intense game of hot potato get in and get out. Right? Well, it also doesn't have to be I'm putting all of my money into tilray and that's gonna bet right? Yeah, your money in multiple stocks and like, increase your odds that the average is gonna work out in your favor.

Dyalekt:

Shout out to Episode 215 it talks about investopedia where we spoke to Caleb silver of the best. Really good one to help folks who want to know a little bit more about investing basics.

Pamela Capalad, CFP, AFC:

Yeah, shall we go to a song by the way, I

Dyalekt:

also really liked this song. I felt like I loved the first one. The rest of us can This one is from cats really from they're from San Antonio, Texas. And this is kid Isaiah and Perth with their joint stock market and we back this one is a little bit shorter. We're back in a couple of minutes and get Oh by the way, if anybody who's listening has a song that they would love to have played on our show. We play indie songs that pertain to the subject matter of what we're talking about. So please feel free to send them to us. If you don't know how to find me then you don't want it enough. I don't want I just want the paper

Unknown:

I just want the paper I just remember that it's fresh off the printer. I'll pass on buddy but he got another winner falling in november december great news with a black Chex Mix because back in the day for some reason this music really got me into that and hopefully you've got that okay so fine without stacks Benjamin first before it can make us ponder which might be enhanced it's great if it gets close to the day my money so my homies so pass the cash my way capable resets no time for the play only for your fingers to my songs in the way record stop play me way pistola hands up Have a nice day I just want the paper you hate this you better fall back on stacks on it this is great but you can start small cancel with the money and he will come in my way I hang up on the wall save money in the cash flow that they head out to the streets so most Exynos will be told for people to Rico goes into the root of the profit and up the repo until we get my money that's sweet in the honey because we all and that isn't legal to be on and we go make it we tell him no type of veto disgusting we're not discussing cuz I'll be thinking must be busted unless I touch it. So fuck it. I can't be living that nine to five minimum wage retaining the base. I don't want I just want the paper. I just want the paper. I just want money.

Dyalekt:

We are back. Budget crew. Yo, one thing I do miss that they don't have enough in rap songs. No more is the DJ sample that was big on the host the day we're chopping up. Mr. They don't have enough of those anymore. And you know and also Yeah, apologies. But I was saying you ain't wanted up I was just kidding. I hate what goes on Oh, if you didn't do this financial thing, then you must have the one enough. You can email me at dialect, dialect calm, but I'll let you figure out how it's spelled. Please send it to us. Like I said, the subject matter of what we're talking about will play the joints especially if it's indie stuff all you famous cats who listen that Come on, you have outlets.

Pamela Capalad, CFP, AFC:

Yes, we are here with Kevin Matthews of building bred at building Brett on all the social media platforms, talking about being stopped investing hedge funds, we do it for the kids how we do it for the kids.

Dyalekt:

As you see he's running around being like I want to know.

Pamela Capalad, CFP, AFC:

I love it. I actually have kids. You have kids love to know, are you teaching them about investing? Are you getting them involved in investments? Are they like babies? And you're like, no, not yet? How do we start thinking about this for our families, too? Yeah. So I've already started investing. For my two little ones. They are six months and two years old. Oh, he he'll be three in March. But yeah, I've already started. I have started discussions with them. But clearly those don't go well, right now. What I want to do is, is really kind of bring them into to the investing in the entire financial piece. My dad always had conversations with me and my brother when we were younger. And you know, Tom was like, why is this man talking about money, like five years old or whatever. But I didn't want them to get involved in to give them the opportunity to I did not have in terms of investing. Because I started like we talked about the difference of for investing for one year versus five years. Imagine if we can have this start. And by the time they're 20 years old, or 25 years of compounding interest in front of them. There, their options will be far greater than mine. And that's that's the that's what I'm trying to do for my kids just to give them the options and opportunities I didn't have. Oh, I love that. That's generational wealth building right there.

Dyalekt:

About how 70% of families lose the wealth after one generation 90% lose it up to and a lot of that have to do with communication and making sure they understand Yeah,

Pamela Capalad, CFP, AFC:

yeah. Right. Right. And talking early. Like it may sound ridiculous to talk to a two year old about this, but it's not like they start understanding the stuff that early already, right. Absolutely. I mean, if I can teach them UFC, like the old videos like LeBron James, like three, you know, he can also learn about the market. So being able to give him the opportunity, but this this happened. So in 2010, I had an internship in New York, I interned at a it was a retirement fund. So it was the first time I was introduced to stock market, I was outmatched. I had no idea what I was doing. But they they taught us how to use some some things. And that's why I learned that if my parents had invested like $100 a month from the year I was born 89 to like 2010, which was the point of the internship, I can add $800,000 just from $100 a month, which is Yeah, that's that's doable. That's $25 a week. I'm sitting there like, my life could have been so much different. Now back then late, early, early, early 90s. There weren't fractional shares, right. There weren't as many financial professionals of color. So I didn't really have the same ground that I had today. Right. And I can do that same thing is true. One was that that is a good point. It was harder to invest. But that's not the case now. Well, I'm getting to that you're like not day trading your kids. Right, right. No, no, no, I have updates that I check, which for me is every six months. I put it in there. Most of us in index funds Now come back six months later, and usually things are all good. And that's the thing to have, they can take on more risk. So in theory, I could I just don't know, that's all. Yeah, and that's the thing, like you don't have to check your investments every single day. If you are a long term investor, like you should have for anywhere between one time a year to four times a year, where you come back, you make some adjustments, and you can you just keep on writing that that way. Yes, I love that. And that's the thing too, is, you know, maybe you didn't buy GameStop stock this time around and you don't have to catch the next wave. If this happens again, necessarily. But I'm betting that in some of the index funds that you're invested in with your kids, there's probably a little bit of GameStop stock in there, probably. So I don't know, anything like that we don't always realize is like, yes, GameStop is has been ridiculous, right, but also a stock like, like square that, you know, they own cash app, they were about 250% last year. So you can do what, you can still do fine without doing the absolute hottest thing on the market. So like, you know, there are other things that are out there, Apple did really well, last year, if you're into that type of stuff, just a regular index fund still got to like 12 to 15%, which is still really good. There are a lot of other things, it doesn't have to be like the fastest hottest thing on the market that you have to invest. Right, right. And if for those of you who are not sure what index funds are index funds are a collection of a bunch of different stocks, usually between what 500 to 1000, sometimes more, so you're fully diversified, you're invested in a bunch of different companies. So even though GameStop was trading at $4, a share at the end of 2020, it didn't matter, because you were also having companies in there that were growing, and then that kind of mitigates all the risk of companies going up and down. Right. Right. Right. I the metaphor I like to use is, it's the difference between, you know, choosing the Knicks, or, or choosing the entire NBA, because, and that's the thing when you're choosing one stock, yeah, hope that it's, you know, the Lakers or whatever. But why is there pressure on me, if I own the entire NBA, I'm gonna be fine with others. And that's what an index fund does. So it takes the pressure off of me. I know that I'm going whatever is the best stock, I'm going to have it by default.

Unknown:

Yeah. Well,

Dyalekt:

with your analogy, it's like going from being a fan to being an owner. Because you know, one owner no matter what team you own, because the whole NBA got your back.

Pamela Capalad, CFP, AFC:

Oh, I love it. And you can still shop at gamestop if you want.

Unknown:

Yeah.

Pamela Capalad, CFP, AFC:

You don't got to rely on trading those games in either. Right? Exactly.

Unknown:

Oh, my gosh, I

Pamela Capalad, CFP, AFC:

love it. I love it. Oh, my goodness. Okay. Oh, yes. I just want to kind of go back to the bigger picture. Because I know there are a lot of people on the anti capitalist side who were pretty excited about this in general, and what happened, what this could mean for like Wall Street regulation and things like that. Do you have any final thoughts in terms of like, what we should we should be looking out for both as like investors as voters, as people who do want to see like a shift happen with the money going from Wall Street to regular people?

Dyalekt:

Yes. How do we continue the momentum?

Pamela Capalad, CFP, AFC:

Yeah, how do we continue the momentum? Yeah, I would say to keep applying pressure. So the lawsuit against Robin Hood is one way to do that. This is time to call your local legislator and apply pressure to say like, I don't like what Robin Hood did. But also I want more disclosures about what these hedge funds do, where they are, and what's going on there. So you definitely want to apply pressure. And, you know, with the way that the Senate and the entire government has changed, this is the time to do it, you don't have time to wait, you got two years to really just push it and get it done. And we don't know what's gonna happen after that. So this is the time to continue applying pressure. also continue to educate yourself and take advantage as an investor as much as you can, for God's purpose, investing in certain things or not investing in certain things. You want to make sure that you are educated because this moment, as an investment may not last, there's always other opportunities are coming and going. So you want to be in the right spot. So let's say you missed it on GameStop. That's fine. But how do you invest your money now? How do you make sure that the money you do have already in your 401k is okay, so you want to apply pressure both at the legislative level and as the with the the lawsuit level. And then also make sure that you get with whoever you need to raise as a certified financial planner, whether it's an estate attorney or whomever you need an accountant, make sure you get with them to also better yourself and put yourself in the best position that you can be okay financially, regardless of what happens in love that that is such a great way to end. Thank you so, so much for joining us, Kevin. Can you tell everyone where to find you? Yeah, thank you for having me. You can find me on all things at building brand and building brands calm.

Dyalekt:

Thank you. Thank you. Thank you, Kevin. Thank you all for listening today. As usual, you know, go to all the places hate us rate us debate us give whatever star rating you want to give. We don't care just you know, show us how you feel it and we're gonna end you off with actually one of the more famous acts that we've allowed you at least you know, the people from it. They call themselves live from indoors. They put this together as a debit what's going on. This is Rob Kutner and Emmy winning writer for stuff like The Daily Show, and Levi Wilson, a playwright from NYC and musician and actor and Lisa hammer, a filmmaker. These cats got together to make this song about hedge funds that they put together for charity. If you look on the screen, you'll be able to see where you could donate to to support them. And it's called grandma got run over by a hedge fund and we'll check y'all next time. Thank you so much for being a part of this again like you said that you want us to play cinemag group until then we'll get out of your way. Yeah, it's exactly what you think it is.

Unknown:

rushing off to Wall Street Easter more. Normally the barn goes down to Sunday. The day now Jesus was reborn. She was getting low on TV. Put on her Sunday best. What is Sunday anymore? You can go out and look at like your next door neighbor who cooks matte lipstick betos meth mouth blue she forgot to bring her face mask. And the school was just packed with patriotism in one place. She just needed one more dozen and nine days to build her pantry all the way up to the back. We never have enough cheese doodles. Grandma got run over by hedge fun. shopping at the Walmart of the street. She just posted on her Facebook about some angels that she's been dying to meet her throat she felt a tickle. doing her patriotic best to save the free market for her grandkids. She hooked her immune system to the second greatest generation. You hardly hear her coughing over those in New York Stock Exchange. Celebrating the savior of the President's hotels. Grandma got run over by hedge funds rushing off the wall street. Thank god we're a nation of pro life. You're not born my grandkids can die.