To be honest, it doesn't really matter. This isn't about whether Robinhood technically must or must not do what they're doing, but that the system is setup in such a way that all these claims of "supporting the people" are fundamentally 100% bullshit.
Robinhood tanked their credibility by letting the mask slip and people are on that like hyenas because of the irony. Really though, the focus on them is a distraction from the much larger slip by the entire financial system.
> these claims of "supporting the people" is fundamentally 100% bullshit.
what a world where a free platform takes an action to stay solvent and in business and its a bullshit claim that theyre helping their customers. i guess they shouldve done the more helpful thing and gone bankrupt, illegally allowing trades they cant cover.
It starts with PR. If there was one moment for a company to be brutally honest, it was for Robin Hood yesterday. They didn't get in front of this story, they didn't explain the issue in detail - instead, they blocked the trades, posted a bullshit information-free blogpost, and have their CEO doing rounds on the news smiling and spewing zero-information noise.
This isn't a business model problem, it's customer relationship management problem. They screwed it up big time. Like corporations usually do with their ISO standard PR, but then usually there isn't a critical mass of angry customers looking for blood (some of which are really angry, because they're already operating in the "I'll YOLO what I have on a chance to make Wall Street pay for the pain they inflicted on my parents in 2008" mode).
because people are mad at them? you think they shouldve gone public during a high-volume, high-volatility feeding frenzy with tens of billions flying around and said "we're insolvent, but its ok we're taking action to recover our position"?
it looks to me like their actions were totally rational and at least a good-case scenario, if not best-case. platforms have been deleted in the past due to circumstances like these, and i think the CEO going on TV and saying theyre on the verge of massive legal and financial problems is suicide. keeping their business alive is supporting their customers. no if, ands, or buts.
calling this a PR problem is a bit obnoxious. its like saying theres no technical problem, but people think there is, so the company has to not only continue providing their free services but also make their users feel good while doing so. RH had to navigate dangerous waters, with bankruptcy to the left, bankruptcy AND lawsuits on the right, and only lawsuits ahead. im not sure how they couldve done better.
> you think they shouldve gone public during a high-volume, high-volatility feeding frenzy with tens of billions flying around and said "we're insolvent, but its ok we're taking action to recover our position"?
Sure, why not? Everyone knows the situation is extremely unusual and not indicative of RH's ordinary performance. This way, they'd stay on the friendly side of everyone.
> its like saying theres no technical problem, but people think there is, so the company has to not only continue providing their free services but also make their users feel good while doing so.
I'm not saying they should've allowed people to continue buying GME and other meme stocks. I'm saying they should've honestly communicated the actual reasons behind their decision.
because if youre having liquidity problems, telling everyone that creates an incentive for them to liquidate on your platform and leave, creating a death spiral resulting in the destruction of your company and preventing everyone from liquidating in the first place. a bank run, but for RH and their clearing firm(s).
in other words, they were and are doing whats best for their customers.
They were dismissive enough of retailers that it didn't even enter their feeble minds that they might need to be able to cover the costs of a real market manipulation, the kind that institutions do all the time without having these kinds of problems.
They were always working for their hedge fund investors. They just got a hard slap to the face by the people they claimed to be working for.
And honestly, I'm not very impressed by anyone who would defend them.
> They just got a hard slap to the face by the people they claimed to be working for.
youre saying WSB making a stock so volatile that a brokerage cant afford to keep it on its books is a moral victory? what morals are you basing this on?
> And honestly, I'm not very impressed by anyone who would defend them.
we're commenting on an article about how RH had to borrow billions to stay afloat AFTER they already took action to minimize their exposure. they couldve gone under, and were probably insolvent. im not exactly doing mental gymnastics here.
> youre saying WSB making a stock so volatile that a brokerage cant afford to keep it on its books is a moral victory? what morals are you basing this on?
The person has already answered it:
>> the kind that institutions do all the time without having these kinds of problems.
What a world where people are more concerned about a single company going under than the fact that the working class is finally doing something against the rigged capitalist system.
actually im glad you said this. this is the core problem with this WSB/RH/GME event.
a certain percentage of people in WSB only want to light a pile of their money on fire for the sole purpose of bankrupting some hedge funds. they expect no returns and only want to cause pain to people with more money than them that they dont like.
another percentage of people (i think this group is much, much larger than the first) think bankrupting the short positions is gonna make them huge returns. they think theyre all david collectively fighting a goliath as the proletariat rises up. most of these people are sorely mistaken and will lose everything, but some will make money.
the RH trade halt (EDIT: only buying was halted, a "trade halt" technically means both) is allowing the shorts to unwind more gracefully, making the first group of people angry. theyre not getting their witchburning, or public execution, or lynching - however you want to frame it.
the problem is the second group of people think theyre being defrauded out of huge returns by an artificial exit from the short squeeze. these people are wrong to begin with. most of them were never going to make huge returns. even if they successfully bankrupted the shorts, most of them are left holding stock they bought for $100, $200, $300, or $400 a share (WSB was memeing share price was gonna go into the thousands) that is worth <$90. those people were always going to lose, they just didnt know it. but now they have a scape goat, even though they were on the wrong side of the trade to begin with.
> left holding stock they bought for $100, $200, $300, or $400 a share (WSB was memeing share price was gonna go into the thousands) that is worth <$90
Many people said the same thing about TSLA before it stabilized at higher levels. I bought at under $40 and sold around $80 because I thought fundamentals mattered. Turns out they don't right now.
Everyone talking about what GME is 'actually worth' is spouting bullshit. The fact is, no one knows. Because it's up to the market.
>I thought fundamentals mattered. Turns out they don't right now.
Fundamentals never matter "right now". Fundamentals are about long-term investing and growing money over time.
Day trading is about speculation, not investing. WallstreetBETS has nothing to do with market fundamentals or investing money. This is the point of the Keynes quote "The Markets Can Remain Irrational Longer Than You Can Remain Solvent" - Markets don't rely on the the "fundamentals" in the short term, only in the long term.
>Everyone talking about what GME is 'actually worth' is spouting bullshit.
That's because in the long term, GME's value hasn't changed. GameStop the company is just as valuable as it was a month, meaning it's basically worthless. Which means before too long the stock is going to crash and the majority of people who bought it are going to lose a lot of money, while the few who bought earlier will make out.
Whether it's the legal definition of "pump and dump" is pretty irrelevant, because in practice it's a pump and dump scheme, and is going to leave the majority of people involved with a lot of regrets.
> Fundamentals are about long-term investing and growing money over time [...] Day trading is about speculation
What you call 'day trading' has turned into week trading, has turned into multiple-month trading, and I would argue even beyond a year now in a lot of cases. Plenty of stocks have been pumped far beyond what their 'fundamentals' would justify. In some cases, that has changed the trajectory of companies and even entire sectors.
> in the long term, GME's value hasn't changed
This is entirely debatable. The investors just changed it, and new people are on the board who could potentially turn it into an eSports empire, or the next Valve, or who knows what else. Not at all likely, I know, but money changes things and there is some amount of 'true believer' investment happening, like we saw with Tesla.
Honestly, I don't like all this volatility one bit. I am increasingly concerned about not ending up homeless when I'm elderly. But the fact is, the market appears to be changing, and so-called 'retail investors' may be gaining new prominence in the greater order of things. Valuations based on hopes for what could happen 30 years out instead of how much paper profits got jacked up over a 3-month period. It's scary and I don't like it. But who knows, in the long run it could be a good thing? I don't think you, or I, or anyone else can say from here.
>Everyone talking about what GME is 'actually worth' is spouting bullshit. The fact is, no one knows. Because it's up to the market.
youre right in that no one, least of all me, can predict future stock prices, but i think youre missing the point. even if GME stabilizes at $150 - which is an unlikely tripling of value - most of the people involved are going to lose most of their investment.
the fundamental principal is that a short-squeeze HAS to end in a pricing crash. its the whole mechanism by which the squeeze occurs in the first place. the final price isnt really relevant, the point is that most people have to absorb large losses by definition. I think a lot of the players dont understand this; they think its free money, and are gonna scream bloody murder because they think they only lost because RH did something illegal. RH actions are irrelevant, legal or not, because the trade was bad in the first place.
the only way this doesnt happen is if the original market was wrong about GME to the tune of 1000%. maybe the short squeeze happens and GME never crashes, it peaks and stays at $350 and then beats the S&P 500 by 10% YoY for the next decade and everyone that bought long just makes money. if you believe that then well, good luck.
> the only way this doesnt happen is if the original market was wrong about GME to the tune of 1000%
The reason I used TSLA as an example is because this is pretty close to what happened there! The future scenarios 'priced in' to that company now are several degrees beyond ludicrous. I don't think I'm missing the point at all, which to me is: massive swaths of the entire market are super irrational right now, and have been for a while, with no end in sight.
> no one, least of all me, can predict future stock prices
This seems more true to me today than it ever has been.
After all the shit I've seen happen with stocks in the past few years (2020 especially), things I used to consider impossible I no longer do. None of this makes any sense any more. I don't really have the stomach for it, honestly, the whole thing makes me nauseous. But if I want my meager savings to do anything other than lose value, I still have to try to evaluate what's going on to weigh my choices.
> massive swaths of the entire market are super irrational right now, and have been for a while, with no end in sight.
good point. youre making me second guess myself, but i think in the end GME's case is just too extreme. it mightve been undervalued at $20, but i just dont see the volume of positions >$200 as defendable or profitable. even if the gamma drives the price bananas high today, the end result will just be an even larger crash at the end.
Wait a minute, I've read that they and other brokers did not halt trade, they stopped or limited purchasing but not selling. Not only that, some of their customers apparently were informed about this beforehand (as alleged by insiders on Twitter).
People argue that this is criminal market manipulation.
> I've read that they and other brokers did not halt trade, they stopped or limited purchasing but not selling.
you are correct, I used the term "trade halt" incorrectly. i clumsily meant the portion of trading that was has halted, which is neither clear nor an appropriate usage of the term.
> People argue that this is criminal market manipulation.
shrug. some people wouldve said that if it WAS a full trade halt - if people can't sell to get their gains before a crash, thats illegal market manipulation right?
regardless, it seems clear that RH couldnt cover more volatile stock buys so they halted volatile stock buying. maybe they shouldve taken different actions, but they have well-known legal and contractual requirements about liquidity and cash-holdings for the volatile stock trades they broker.
> Really though, the focus on them is a distraction from the much larger slip by the entire financial system.
Exactly. I also watched the recent CNBC interview with Chamath Palihapitiya [1]. I would like to it, but CNBC keeps taking it down.
In any case, the host really doesn’t seem like he’s there to « get to the bottom of things or to understand » but to push the idea that the problem is anything other than the preconditions that led up to this.
Chamath was spot on.
[1]: CNBC Chamath Palihapitiya Interview January 27th, 2021
"Retail trading" is not even remotely close to "the entire financial system." And it's that kind of casual but enormous misunderstanding that leads to casual, ignorant participation I. retail trading itself.
Robinhood tanked their credibility by letting the mask slip and people are on that like hyenas because of the irony. Really though, the focus on them is a distraction from the much larger slip by the entire financial system.