Tag: Economic Downturn

Citadel And Virtu Are Creating Massive Systemic Risk

November 3, 2021 / Frank Nez

The system almost failed earlier this year due to the systemic risks in the hands of the two biggest market makers.

Citadel and Virtu CEO’s Ken Griffin and Douglas Cifu continue to argue that retail investors have never had it better.

Although the SEC has been observing for quite some time, they are finally looking into both of their business models.

But is that enough?

What can be done in order to avoid the collapse of an entire system?

The SEC has taken a stance against high frequency trading and is currently supporting the D-Limit order from IEX.

It’s time for retail investors to speak up and let our government leaders know our needs in the market.

Welcome to Franknez.com – the blog that fights for retail investors and for a fair market. Today’s topic is extremely important so let’s dive right into it.

Let’s get started!

System of Checks and Balances

In the United States, the system of checks and balances provides each branch of government with individual powers to check the other branches and prevent one branch from becoming too powerful.

However, there seems to be a massive concentration of power between market makers Citadel and Virtu in the finance world.

These two market makers are responsible for processing majority of retail investor orders.

This creates massive systemic risks since there is so much power concentrated just within these two key players.

Should one or both fail, the entire system could collapse.

This almost happened in January during the ‘meme stock’ rallies.

Citadel claims they were the only market maker processing orders from Robinhood and this is a big problem.

There needs to be a separation of power.

It’s extremely important that retail investors voice their needs from government leaders regarding this matter.

PFOF Takes More Than It Gives

Citadel, Virtu, and Robinhood continue to stand by payment for order flow.

The issue with PFOF is that it takes more than it actually gives.

Market makers argue that it saves retail investors billions of dollars annually but fail to mention that they also make money from retail through high frequency trading.

In this documentary you will find Citadel makes their money shorting stock.

The Story of Citadel

Retail investors don’t want their orders processed by a company that is a market maker, hedge fund, and dark pool all at the same time.

Not only is Citadel profiting from retail money through high frequency trading, but they are also shorting the stock retail investors are buying through various means.

Dark pool trading and naked short selling are some other ways we’ve seen hedge funds suppress the rise of a stocks share price.

More so in ‘meme stocks’ such as GameStop and AMC, which are heavily shorted.

But there’s another issue that has yet to be addressed and that is OTC, or what’s also known as off-exchange trading.

The Rise of Off-Exchange Trading

Over-the-counter (OTC), or off-exchange trading is when trading occurs between two parties instead of through an exchange, such as the NYSE (New York Stock Exchange).

Market makers essentially negotiate with one another through dealer quotation services such as FINRA’s OTC Bulletin Board.

Yes, that is the same FINRA that is supposed to be protecting retail investors and safeguarding market integrity.

Off exchange trading is not as regulated as the NYSE nor does it require prices to be publicly disclosed.

Market makers can short a stock in these off exchange trading platforms and also create a ‘perfect hedge’, allowing them to offset or eliminate all risk on their position(s).

Retail investors go long on stocks.

So when market makers such as Citadel and Virtu are using tools to make money from shorting stocks, retail investors are at a massive disadvantage.

Market Makers Are A Threat To Our Economy

Market makers pose a serious risk to our economy and the businesses that provide massive value to our society.

As long as this concentration of power isn’t broken, the United States economy will always face systemic risk.

And when the entire country is economically on its knees, financial institutions who shorted on the way down will be the only ones compensated for it.

This is when integrity is buried by greed.

So what’s going to be done about it?

Our community now has a voice.

We must continue to fight against market corruption, and we must fight for a fair market.

Only then will we be able to mitigate systemic risk and make a positive impact in our economy.

Retail Investors Can Grow Our Economy

With more people now learning about the markets more than ever, this could greatly benefit our economy.

Not only does the average person get to invest in the stock market, but we get to support the ideas and innovations of the companies in our country.

People don’t need to make a lot of money to invest.

But fair investing could improve the quality of life for millions of people.

The average person could provide more for their family, the government would collect capital gain taxes, and our businesses would excel much more rapidly.

Our government must look at solutions for economic prosperity and growth.

Market makers such as Citadel and Virtu suppress economic growth for their selfish gain.

They do not contribute to society.

This is why we’re seeing a power like China catch up to the United States with such an intense and exponential growth.

They’ve eliminated a lot of the issues in their markets that we have in ours today.

Institutional investors play a dominant role in the U.S markets, while Chinese markets are dominated by retail investors.

This, ladies and gentlemen is why there are now more wealthier Chinese than there are Americans.

Our government must look at market structure and identify what is going to spur growth in our nation.

Yellen: “America Could Default For The First Time In History”

September 28, 2021 / Frank Nez

News arose today regarding congress raising America’s debt limit to keep the U.S government on. Treasury Secretary Janet Yellen expresses her deepest concerns regarding our economy.

Yellen is currently blowing up on Twitter feeds as she’s stated, “there are issues relating to hedge funds and the possibility of leverage, they can trigger financial runs”..

A financial run is a consecutive run in the markets, whether bullish or bearish. In the case of a hedge fund, it’s usually bearish due to short selling or short-laddering.

Welcome to Franknez.com – today’s finance news will uncover some rather jarring information in regards to our economy. Yellen has warned House Speaker Nancy Pelosi on the matters.

Let’s get started!

Failing To Act Could Spark An Economic Catastrophe

Yet again our government is forced raise America’s debt ceiling or face devastating consequences.

Raising the debt ceiling essentially provides America with a larger line of credit. Yellen’s solution is for America to continue mounting debt, as the treasuries extraordinary measures to print more money could have very well been exhausted.

Although, if congress does not raise the debt ceiling, the treasury would have to step in to keep the federal government running.

Inflation continues to skyrocket with the printing of money. And the only two solutions America has is to either keep digging a debt hole, or exhaust the worth of our dollar.

The lack of financial literacy in our own government is what will ruin our financial system.

How Did We Get Here?

If you ask Robert Kiyosaki, he will say the lack of financial education got America here. And I agree. Robert Kiyosaki, author of Rich Dad, Poor Dad is a strong advocate for financial literacy.

In this incredible interview with Patrick Bet-David, Robert talks to us about his thoughts on the U.S national debt.

Robert Kiyosaki on The U.S national debt

If you follow Robert on Twitter, you know his tweets are very strong when it comes to the Feds, our government, and the destruction of our financial systems.

The U.S Will Run Out of Cash By October 18th

Congress has up until Monday, October 18th to raise the national debt before they run out of cash.

“It is imperative that Congress swiftly addresses the debt limit,” Yellen said yesterday in testimony before the U.S. Senate Banking Committee. “If it does not, America would default for the first time in history. The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.”

What Would Happen If America Goes On Default?

If America goes on default, it would trigger a broad market sell-off and put a hold on everything from government payments to the ability to borrow.

Unemployment, child tax, and social security would all stop flowing to the American people. Not to mention, our troops would stop getting paid.

And although social security is a self-funded program, the money is drawn from various trust funds to pay benefits.

Stocks and crypto would tank which would present a buying opportunity for investors. Investors usually profit from these market crashes as they begin to correct themselves. As for hedge funds, closing short positions could result in the MOASS retail investors have been waiting for.

A default would only be temporary, but could hurt Americans who depend on assistance from the government.

The interest rates on credit cards, car loans, and mortgages would also skyrocket, making it almost nearly impossible for struggling families to keep up with occurring debt.

Let’s Talk Solutions For An Economic Downturn

How can we prepare ourselves for an economic downturn? This is not financial advice, but advice from a friend.

If you have money in stocks and crypto, know that with a stock market crash the value of your assets will go down. However, if you take this opportunity to increase your position then you will come out profiting during its correction.

Negative beta stocks such as AMC and GME are more resilient and less volatile when it comes to crashes.

Be sure to have an emergency fund set aside in case you see yourself needing cash short-term. While most of our holdings are in assets, it would be wise to keep cash at hand to prevent from liquidating certain stocks or crypto.

If you have a safe stream(s) of income, make sure you’re stacking. That way when turmoil hits, you’ll be ready to take advantage of the investing opportunities presented to you.

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Read More: Stock & Crypto News / Finance News

How To Better Prepare Yourself For The Next Recession

May 13, 2020 / Frank Nez

It is never too early to begin preparing for an economic downturn. What you do today can save you tomorrow. If you weren’t prepared for the coronavirus disruption be sure to also share this with a loved one. Here’s how to better prepare yourself for the next recession.

Pay Off Big Debt

One way to better prepare yourself for the next recession is to pay off big debt. Paying off debt will reduce the amount of monthly payments you have which will result in having more funds available to save or invest.

Paying off debt also lifts the weight off your shoulders knowing you don’t owe any parties anything. Pay off your vehicle or any open credit cards. If you have a lot of debt find out what strategy we suggest using when it comes down to paying thousands in debt here.

Have An Emergency Fund

Having an emergency fund is one of the single most effective ways to better prepare yourself for the next recession. Think of your emergency fund as a net from which you can fall on should things disrupt your plans. Recessions can lead to several hardships including the loss of a job or business. Having an emergency fund allows you to have access to capital in the event that the worse case scenario occurs in your financial world.

If you’re stuck on exactly how to create an emergency fund read about how to start it here. Franknez.com walks you through on creating a goal and then having your savings work for you so that your money multiplies through compound interest.

Our mission is to provide our readers with real world experience and advice to help further their financial knowledge and secure their financial future.
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Live Below Your Means

A great suggestions as to how you can better prepare yourself for the next recession is to live below your means. So what exactly does it mean to live below your means?

To live below your means is to live significantly below the threshold of your annual income.

Living below your means allows you to have financial breathing room. As a result, you’re able to save more money and increase the amount dedicated to your emergency fund. Here are some ways on how you can live below your means:

Downsize your home if you don’t need the ‘excess’ space.
The new vehicle can wait (practice delayed gratification)
Don’t over-indulge in jewelry or high fashion clothing (there’s a time for it)
Have less takeout (keep it in moderation – set a budget)
Resist the new gadgets – make due with the current (for now)

When you live below your means you essentially grant yourself access to manageable monetary means. Prepare yourself for the next recession by eliminating the stress of going paycheck to paycheck.

Continue Budgeting

Budgeting Will Help You Prepare Yourself For The Next Recession

Budgeting in general is a great winner habit to have. Budgeting long-term will help you achieve your savings goals and keep you living below your means. A great way to keep track of your expenses is to frequently log in to your bank account(s) and build awareness of where your money is going. We also suggest downloading the app MINT by Intuit. It tracks down your expenses and keeps record of all your accounts. It makes it super easy to keep quick tabs on your accounts.

Don’t Depend On One Source Of Income

What occurs when you depend on one source of income and then all of a sudden it’s completely gone or cut in half? This is what happened to 22 million Americans who filed for unemployment during the coronavirus pandemic.

Develop Multiple Sources Of Income To Protect You During A Recession

Learn to better prepare yourself for the next recession by acquiring additional skills and knowledge and learn how to create more than one source of discretionary income. Franknez.com has posts on how to start an online business and grow it, how to earn passive income, how to start a blog, side hustle ideas & so much more. Be sure to subscribe to our newsletter to be notified when new posts are published!

Prepare yourself for the next recession by generating income from a variety of sources.

Tip: By acquiring multiple sources of income you ensure yourself financial growth and financial security.

Develop A High Income Skill

What does it mean to develop a high income skill? This means earning a promotion, developing skills to attract higher paying opportunities, selling more, or becoming involved in anything that will increase your current income.

By increasing your income you gain monetary means to pay off debt and save money for a rainy day. This is a great way to prepare yourself for another worse case scenario such as a disastrous recession. If it becomes too difficult to develop multiple sources of income or it’s not within your time limitations to do so, developing a high income skill can certainly be a great way to compensate.

Tip: Do not spend more as you earn more.

Be sure you continue to live below your means as you increase your income. You will have breathing room and gain the confidence to face any financial challenge that comes your way. If you find yourself in need of motivation we suggest reading 10X by Grant Cardone. This book discusses how you can increase your income and meet your goals by essentially putting in 10X amount of effort in everything you do. Grab the book here.

Choose Your Industry Well

Choose A Good Industry To Become Recession Proof

One way you can better prepare yourself for the next recession is to choose your industry well. Take a look at the industries that thrived during the coronavirus pandemic vs the ones that didn’t. This is a sure way to identify which sectors are a ‘safer’ career choice.

Industries that thrive during recessions include:

Healthcare
Logistics
Accounting
Biotechnology
Automotive
Economists
Utility Companies
Funeral Services
Veterinary
Courier / Freight
Telecommunications
Online Businesses

Become recession proof by choosing a great career that won’t die down during an economic distress.

Increase Your Credit Score

The people who are getting approved for 0% APR credit cards and for home loans are those with a great credit scores. Keep in mind, recessions are also the time to learn how to identify new opportunities. Qualifying for an affordable home while the market is low could be your time to make that move; it might not. Perhaps a 0% APR credit card can help eliminate other credit card debt and help you further your personal finances. A high credit score opens opportunity, even during a recession. Start building your credit now; your future self will thank you.

It would be wise to prepare yourself for the next recession by increasing your credit score due to the opportunities that open up with credit. Read: How To Increase Your Credit Score | Reach Excellent.

Diversify Your Investments

Another tip on how to better prepare yourself for the next recession is to diversify your investments. Don’t keep all your eggs in one basket. Franknez.com has posts on how to earn interest from a high yielding savings or money market account, how start an online business, and how to invest in the stock market step by step!

Franknez.com teaches many ways you can diversify your income!

Diversify your investments by allowing your money to work for you in a variety of ways without you having to put up with much maintenance. This strategy will require you to take some personal risks though it isn’t as scary as it actually sounds! Risk plays a big part in securing your financial future. Prepare yourself for the next recession by learning this important wealth building skill.

Here are some ways you can prepare for a recession by diversifying your income:

Move money into a market or high yielding savings account
Build a portfolio with index funds and ETFs (stocks)
Set money aside in a personal savings account
Stack your checking account

Read: How To Invest In The Stock Market (Step by Step)

Understand The Importance Of Networking

Learn to identify people of value who can play an important role in your life when it comes to health, career, finances, mentorship, and partnerships. It is important to build relationships with people in these categories because they become connections. These links of relationships are known as a network.

Networking Will Help Prepare Yourself For The Next Recession

Better prepare yourself for the next recession by building a strong network as it can prove useful during the times of hardships. If you lose your job you might know someone you networked with who might be able to help. Whether its recommending you to an employer or even going to the greater lengths of personally hiring you, networking opens opportunities.

Subscribe To Our Newsletter!

Please subscribe to our newsletter if you find value in our content! We are here to help you make great financial decisions in order to help you secure your financial future. Let us know what you’re doing to become recession proof. If you have other tips on how to better prepare yourself for the next recession please share with our readers!

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Tag: Economic Downturn

Citadel And Virtu Are Creating Massive Systemic Risk