Tag: Economy News

Citadel Faces Potential Default on Russian Tech Company

March 28, 2022 / Frank Nez

Citadel Default on Russian bonds — Market News: Citadel faces potential default on Russian bonds

Citadel is facing potential default on convertible bonds from Russia’s Yandex NV.

Yandex NV is an internet and technology company that provides an internet search engine in Russia and other international markets.

Tigran Khudaverdyan has stepped down from his roles as Executive Director and Deputy CEO at Yandex.

Citadel could default on convertible bonds worth billions.

Here’s how Russia is affecting the hedge fund.

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(Bloomberg) Tech company suspension could lead to Citadel default in Russian bonds

The Russian tech company’s U.S. shares have been suspended for more than five days, enabling bondholders to ask for repayment in full.

Citadel just happens to be one of those bondholders who wants their money back.

The firm said it does not have the money to redeem the $1.25 billion bonds, which are meant to be exchangeable for common stock.

Yandex is one of few Russian companies with convertible bonds issued from foreign financial institutions.

And because restrictions complicate the transfer of money out of Russia, access to capital markets to raise funds any time soon seems highly unlikely.

This significantly increases the odds of Citadel having to default on their Russian bonds.

If Citadel defaults on these bonds, the hedge fund would have accrued additional losses its first quarter of 2022.

Representatives from Citadel declined to comment on the matter, according to Bloomberg.

JP Morgan Chase & Co. turns down advisory role

JP Morgan turns down advisory role — Citadel and bondholders seek advisory – JP Morgan declines

Bondholders have the right to ask to be repaid in full if the company’s shares stop trading for over five days.

However, Yandex only has $615 million in cash with only 60% of that money located outside of Russia.

This means Yandex only has approximately $369 million in liquidity.

That’s a massive difference from the $1.25 billion they owe to Citadel and other institutions affected.

Because sanctions are preventing money from leaving Russia, it’s impossible Citadel will obtain cash from the country.

Bondholders are struggling to find advisors to navigate the process.

JPMorgan Chase & Co. turned down an advisory role on the situation after participating in initial discussions.

The bank simply does not want to get involved.

Will Citadel default on these bonds?

The chances are very likely.

Margin call tension rises

Credit Suisse has been margin calling clients exposed to Russia.

In the coal industry, Peabody received a $534 million margin call.

We’ve recently seen Citadel pull back $2 billion from Gabe Plotkin’s Melvin Capital as they too have been experiencing losses.

Even as Citadel faces default on Russian bonds, the hedge fund has sent signals of distress in the past few months.

Events include from receiving a $1.2 billion lifeline from Paradigm and Sequoia to restricting customers from cashing out.

The Russia-Ukraine conflict is creating losses even for short sellers during a time they would usually profit.

It seems it’s only a matter of time before hedge funds start receiving margin calls too.

But will big banks be able to bail everyone out?

What do you think?

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Read: Ukraine: These famous brands have pulled out from Russia

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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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