Hacking the Global Financial System (For Fun and Profit)
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Abstract: With the emergence of a globalized economy, the global financial system has ostensibly become the world’s most powerful institutional network. Because of its far reaching geopolitical and socioeconomic impact, bad actors have continuously sought to undermine its integrity and capitalize on its esoteric framework. In recent years however, a fervent retail investor movement has emerged that utilizes crowdsourced investment tactics to advance financial justice. By applying the hacker mindset, we too can leverage the same tools and methods used by powerful institutional investors to minimize financial risks and level the financial playing field. Information is power.
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Hacking the Global Financial System (For Fun and Profit)
- 1. HACKING THE GLOBAL FINANCIAL SYSTEM (for fun and profit)
- 2. DISCLAIMER The content, tools, and methodologies presented are 100% legal. In some examples this may shock and enrage you. Please remain calm. This should not be considered advice on legal, tax, investment, accounting, regulatory, or other matters. Always consult your own financial, legal, tax, accounting, or similar advisors before entering into any investment position. Under no circumstances shall the presenter of this content be liable for any use of, for any decision made, or action taken in reliance upon or for any inaccuracies or errors in, or omissions from, the information herein. The information is not intended as an offer or solicitation for the purchase or sale of any product or service. The presenter does not hold any positions in the referenced securities.
- 4. INTRODUCTION
- 5. WHOAMI » Hacker, cyberpunk, maker » Philanthropist » Digital rights activist » Startup and nonprofit founder » Economics and finance enthusiast » B.S., Business Administration » M.S., Cybersecurity » Hacking since 1984
- 6. MOTIVATION » Cross-disciplinary hacker mindset » Promote transparency and accountability » Improve finance and economics literacy » Empower the underdog and stick it to The Man » Fun and profit
- 7. STRENGTHS The hacker tends to be… » Skeptical » Critical thinker » Inquisitive » Autodidactic » Problem solver » Anti-establishment
- 8. WEAKNESSES The system tends to be… » Complex » Opaque » Corrupt » Collusive
- 9. INTELLIGENCE
- 10. This talk is NOT about… BLUE versus RED LEFT versus RIGHT This talk IS about… US versus THEM
- 15. WHERE Centralized Exchanges Over-the-Counter Exchanges Globally Alternative Trading Systems
- 16. WHEN 24 x 7 x 365 Market Hours Extended Hours
- 17. ECONOMICS 101 » Efficient resource allocation » Supply and demand » Scarcity and abundance » Price discovery and elasticity » Substitutes and complements » Differentiation Price p Quantity q D S
- 19. ECONOMICS 101 » Effects of supply and demand on prices » Buy/sell long and short signals SUPPLY DEMAND OUTCOME PRICE SIGNAL Increase Increase Equilibrium None Straddle Decrease Decrease Equilibrium None Straddle Increase None Surplus Decrease Sell / Short Increase Decrease Surplus Decrease Sell / Short Decrease None Shortage Increase Buy / Long Decrease Increase Shortage Increase Buy / Long
- 20. VALUE CHAIN » Supply ± Demand = ± Equilibrium » Benefit ± Cost = ± Value » Revenue ± Expense = ± Profit » Vertical and horizontal integration VALUE CHAIN SUPPLY CHAIN PURCHASING MANUFACTURING DISTRIBUTION DEMAND CHAIN MARKETING SALES SERVICE
- 21. SUPPLY CHAIN » Transnational global network of producers » Production of goods/services Market
- 22. DEMAND CHAIN » Transnational global network of consumers » Consumption of goods/services Market
- 24. INDUSTRIAL COMPLEX » A “threat to democratic government” ~ Dwight D. Eisenhower, 1961 » Businesses become entangled in sociopolitical systems and institutions by creating or bolstering their own profit economies » Businesses may have been created to advance a social or political goal, but mostly profit when the goal is not reached. » Pursue their own financial interests regardless of, and often at the expense of, the best interests of society and individuals » The industrial complex may profit financially from maintaining socially detrimental or inefficient systems Agricultural Prison Military Academic Medical Media Pharmaceutical Athletic
- 25. ANALYSIS
- 27. MACROECONOMIC ANALYSIS » Gross Domestic Product (GDP) » A country’s productivity and value » Consumer Price Index (CPI) » Cost of goods and services consumption » Producer Price Index (PPI) » Cost of goods and services production
- 28. FUNDAMENTAL ANALYSIS » Qualitative » Industry and business model » Competitive advantage » Comparative advantage » Quantitative » Earnings-per-share (EPS) » Price-to-earnings (P/E) Ratio » YoY revenue (TTM)
- 29. TECHNICAL ANALYSIS » Price and volume » Candlestick patterns » Moving Average (MA) » Relative Strength Index (RSI) » Moving Average Convergence/Divergence (MACD) » Multiple Linear Regression (MLR) » Bollinger Bands (BB)
- 30. INFERENTIAL ANALYSIS » Dark Pools » Alternative trading system (ATS) » Privately owned exchanges by JP Morgan, Barclays, Citi, Credit Suisse, Deutsche Bank, UBS, Merrill Lynch, et al » Large volume “block trading” and market liquidity » More daily shares exchanged than NYSE Cheddar Flow Unusual Whales
- 32. INCENTIVE ANALYSIS » Domestic Policy » Cultural » Economic » Social » Foreign Policy » Sanctions » Import / export tariffs » Alliances » Fiscal Policy » Taxation » Budget » Government debt » Monetary Policy » Prime interest rate » Reserve requirements » Open market operations
- 37. STRATEGIES » Day trading » Single day » Technical analysis » High-risk and full-time » Swing trading » Days or weeks » Market movement » Lower-risk and leisurely » Dollar-Cost Averaging (DCA) » Months or years » Passive
- 38. POSITIONS » Long » “Bullish” » Optimistic sentiment » Short » “Bearish” » Pessimistic sentiment » Straddle » Neutral » Long and short simultaneously
- 39. SECURITIES » Equities » Bonds » Currencies » Commodities » Derivatives
- 40. HEDGING & SPECULATION » Options » Calls (bullish) and puts (bearish) » Buyer has a contractual right to buy but no obligation » Seller has a contractual obligation to sell » Call At-The-Money (ATM): Market Price = Strike Price » Call In-The-Money (ITM): Market Price > Strike Price » Call Out-of-the-Money (OTM): Market Price < Strike Price » Futures » Buyer has a contractual obligation to buy » Seller has a contractual obligation to sell » Physical commodities
- 41. TYPE STRIKE MARKET STATE OUTCOME Call $100.00 $100.00 ATM $00.00 Put $100.00 $100.00 ATM $00.00 Call $100.00 $50.00 OTM $50.00 * 100 Potential Loss Put $100.00 $150.00 OTM $50.00 * 100 Potential Loss Call $100.00 $150.00 ITM $50.00 * 100 Potential Gain Put $100.00 $50.00 ITM $50.00 * 100 Potential Gain
- 42. EXPLOITATION
- 44. EARNINGS HACKS General Mills ($GIS) Price Movement: 1. Unusual call/put options activity for $GIS 2. Open interest volume exceeds previous day 3. At-the-money call option contract at $1.65 4. At-the-money put option contract at $2.20 5. Straddle at $1.65 + $2.20 = $3.85 6. $GIS stock is trading at $79.72 7. Movement is ($3.85 / $79.72) * 100 = ± 4.83%
- 49. ORDER HACKS » Order Types » Market (bid/ask equilibrium) » Stop limit (specified price or better) » Trailing stop (price variance) » Good ‘til canceled (conditional)
- 53. TAX HACKS » Short-term (<365 days) capital gains tax » Marginal tax bracket rate » Long-term (>365 days) capital gains tax » Formerly static, now variable rate » Traditional and Roth IRA » Not subject to capital gains tax! » Backdoor Roth IRA
- 66. @WSBChairman @unusual_whales @litcapital @Wu_Tang_Finance @CheddarFlow @ParikPatelCFA @CramerTracker @RampCapitalLLC FOLLOW THESE ACCOUNTS…
- 67. THANK YOU!