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Dear Fellow Traveler: Imagine being eight years old. An older kid comes up and asks you if he can borrow your bike. You let him… But instead of riding your bike, he sells it to someone else. He promises to buy you a better bike when bike prices go down. You agree… However, bike prices go up, and now he has to find a way to buy you a bike at higher prices. That’s basically how a Short Squeeze works. But in Wall Street terms, the kid was a hedge fund, the bike was GameStop stock, and his lunch money was... not enough to cover the losses. A Reverse HeistShort selling is wild. It’s a process of borrowing something you don't own, selling it immediately, and then hoping to buy it back at a lower price later. Let’s say you borrow 100 shares of AT&T (T) from your broker, sell them for $27 each, pocketing $2,700. You're betting the stock will drop to $20. Then you'll buy 100 shares back for $2,000, return them to your broker, and keep the $700 difference. But what if AT&T announces they've cured cancer and signed a deal with NASA? Suddenly, those shares are worth $60 each. You still owe 100 shares, but now they cost $6,000 to buy back. You just lost $3,300 on a $2,700 bet. That's the fear of short selling… Your max profit is capped (stocks can only go to zero), but your losses are infinite. David Can Now Kill GoliathA larger short squeeze occurs when short sellers become trapped in this nightmare, amplified by market mechanics. When heavily shorted stocks start rising, short sellers panic and try to buy shares to "cover" their positions. But their buying pushes prices higher. This forces more short sellers to cover, which pushes prices higher still. It's a feedback loop of financial pain that can turn a modest stock rally into a rocket ship. Back when I was thinner… the classic example in 2008 was Volkswagen. A surprise announcement briefly made it the world's most valuable company. Hedge funds lost billions in days. But the same issue happened in 2021. This time, it was retail traders on Reddit who discovered they could weaponize short squeezes against Wall Street. GameStop was a retailer that was supposed to die quietly. It was a brick-and-mortar video game retailer bleeding money. Short sellers saw easy prey and piled on, shorting more than 100% of the available shares. Yes, people who borrowed the stock to short it then lent it to others who also wanted to short it… Enter r/WallStreetBets… A chaotic Reddit community had noticed something interesting. If they all bought GameStop stock at the same time, they could trigger a massive short squeeze. What started as financial vigilantism turned into a cultural phenomenon. Retail traders, armed with Robinhood accounts and stimulus checks, declared war on hedge funds. The results were unreal… something that never happened before in finance… GameStop's stock price went from $20 to nearly $500 in just weeks. Melvin Capital lost billions and needed a bailout. Other "meme stocks" like AMC joined the party. For many retail traders, it wasn't just about money. It was really about sticking it to Wall Street. Chaos EngineShort squeezes create incredible swings in price action because they break normal supply and demand rules. Usually, when stock prices rise, some investors sell to take profits. But in a short squeeze, the people who most want to sell (short sellers) are forced to buy instead. Imagine a fire drill, but in that case, everyone must run to the fire. When short interest exceeds available shares, you get a mathematical powder keg waiting for a spark. Add in options trading, and you're watching financial physics break down in real time. When the Music StopsWe know that short squeezes can't last forever. They're driven by forced buying rather than genuine demand. Eventually, short sellers either cover their positions or get liquidated. The buying pressure disappears. Retail traders take profits. Gravity returns. GameStop stock hit $483 in January 2021. It's been trading mostly between $10 and $30 since then. Even in this year’s rebound, the stock is still down about 25% in 2025. The squeeze was spectacular, but temporary. For most investors, they're something to watch from a safe distance. For short sellers, they're nightmares that can wipe out years of gains in hours. And for Reddit traders? They're proof that sometimes the house doesn't always win. Just remember: for every short squeeze that makes headlines, there are dozens of failed attempts that bankrupt retail traders who thought they could time lightning. The optimal time to attack typically aligns with when we see a big amount of capital flow back into the markets… which means that it’s best to look for opportunities when our signal turns positive after a period of dormancy, after several weeks. Stay positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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