3/4/2022 - Economy and Finance

Democratize finance

By Horacio Gustavo Ammaturo

Democratize finance

A few months ago, I published an article in which I analyzed the different criteria used, during the years, to evaluate a company, with particular attention to the assets listed in the world trade bags.

In this opportunity, we travel from the primitive accountancy valuations depending on the net worth, passing through the proven ebitda, to soon rise to the projected ebitda and finally, as occurs in those times, to the criterion we call Faith Value.

As it arises from its own definition, faith is a conviction that should not be tested, that is the condition.

Perhaps this is the explanation of many of the stock quotes in our days, especially those associated with technology and research and development in general.

Just as the mesies would cut out Galilee spreading his message to awaken the faith in those men, today abound divine envoys that spread their messages through the infinite space of the web. Celebrities, influencers, community managers, digital journalists, professionals with dubious titles or simply commentators who are excited to express themselves from information, thoughts, chismes or desires no matter their source or truthfulness, just to fish faithful who follow without thinking about their suggestions.

Without the spirit of judging the parts of this scheme, it is worth considering that we are all the owners of the reality that we create and believe, that is, there is not a single reality, everything depends on what place and with which it is noted.

Probably if I remind you Jaime Rogonzinski very few people know who it is, the same could happen to the Reddit social network, of which few people in our country have knowledge.

Reddit is a digital medium, web type, where people open discussion forums, and can climb all kinds of file. The particularity of this data distribution service platform is that competitors can vote for or against the opinion of who provides the information.

9 years ago, Rogonzinski, registered in the Reddit network a space under the name “WallStreetBets”, with the goal that its subscribers will experience and expectations about the New York stock market. Currently, this space has over 3 million followers who normally compete to read about the achievements and failures of their members.

It is customary in the financial markets, as in the jungle, that the weaknesses of a company in the first case or of an animal species in the second, are used as opportunities to take advantage of the situation.

In the animal kingdom, a predator eats the weak, in the stock world speculators play against the price of the company's action.

Perhaps this week a new milestone occurred in the history of investments in public quote actions.

GameStop, whose ticker in the New York Stock Exchange is GME, is a company dedicated to the purchase, sale and exchange of games and consoles for games among other products such as toys, cards or accessories.

The new online game purchase modalities, both in PC programs and in the most modern consoles have forced the company to restructure. Covid 19 was also a very hard hit, as the malls where it has most of the sales outlets have seen very diminished its competitor, both combined circumstances have caused a fall of more than 25% in its sales.

Great players went out hunting the injured prey, selling actions to the future, which in the syringe is called “shorting” betting on an inevitable depreciation of the value of the company. An almost safe operation against the company's adverse conditions.

But it wasn't like that.

On January 22, of this year, just before the dues of the future sale operations (shorts) of the actions of GameStop members of the WallStreetBets community, of the Reddit network, put the possibility of carrying out a maneuver called “short squeeze”, which translated into our language would be something like a grip.

The occupancy consists of buying stocks in a sufficient volume for the price to sustain or even rise. In the face of this situation, low-priced gamblers must go out buying the bonds to fulfill the delivery commitments they took on when they sold the future, generating greater demand and, consequently, contributing to new subas in the quotes.

The apparent David had won Goliat.

A group of followers of a blog had lost fortunes to avezado players of the markets, taking from the buche a bit of insurance, and having added more than two million new members to that group in two days.

In addition to the end of this story, there will be one before and one after in the reasonable and timely risk operations as described.

The power to call social networks define new organizational forms both in social and economic.

The coordinated actions of millions of people place new scenarios where the power of the people has greater interference.

From the yellow vests in France to the WallStreetBets community, people are linked to the virtuality of the networks producing phenomena in the material realities of the street.

It is likely that the role of administrators, consultants or even our rulers is limited only to consulting the outcome of online research on which way to take or where active to invest.

Never before has the people had the tools they have today to manifest and exercise their power, without delegating.

It is possible that the establishment presents a lost battle. Adding regulations to when the big ones lose face to the small ones organized or blocking operations by punishing those who bone out of the scheme, but it is already late. The Internet has opened the Pandora box for those who do not update and adapt to new realities.

The Nobel Prize for Economics of 2.013, Professor Robert Shiller, anticipated in 2,000 the collapse of the overvaluation of the companies called “.com” and then in 2.009, produces a work called “The Subprime Solution” in which analyzes the causes that led to the real estate crisis in the United States and proposes tools to avoid what is called “blister psychology”.

Today, he warns us of the importance that the narrative has in the economy of our days, leading him to express that “In the 21st century, with all information technology and social networks, it seems much easier and faster to spread partially certain or directly false stories. It does not seem by chance that “post-truth” (truth post) was chosen as the international word of the year by the Oxford Dictionary.”, putting emphasis on the importance it has to identify the discourses that can become viral and become influential at the time of making all kinds of decisions to find the origin of economic fluctuations.

As in politics, decisions taken democratically do not guarantee that they are the best, but the most accepted.

Is it common to hear that democracy is the best form of government that man has rehearsed from its origins, is it also the best form of management for speculative assets?

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horacio gustavo ammaturo

Horacio Gustavo Ammaturo

I am Gustavo Ammaturo. I have a degree in Economics. CEO and Director of infrastructure, energy and telecommunications companies. Founder and mentor of Fintech, DeFi and software development companies. Blockchain Product Designer.

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