Stock market has been in a slump all year, crypto down huge. Close to 100k layoffs in tech (according to layoffs.fyi). I think people got other things on their mind than trading stocks/crypto.
Ironically, it's probably best to buy stocks and crypto when they are in valleys like this rather than at peaks. The unemployment rate is still only 3.5% in the US, so anyone getting laid off is being hired back almost immediately with very little slack. The Fed would actually prefer to see higher unemployment around 6% to better manage inflation so they'll keep interest rates high until they see that happen.
Until it drops enough that the DCA crowd gets scared. People have been told by reddit that there's an easy way to riches, by just blindly DCAing every month, and most people have blindly accepted this gospel. It just has to go low enough for the spell to break.
It's as if not everyone can be rich with this one simple trick of dumping your hard earned cash into buying whatever Blackrock is dumping on you every month till eternity.
Usually a great strategy.
However, 2020-2021 were an artificially created equity bubble.
I don't think we will see this coming back anytime soon.
https://i.imgur.com/MsIGcSo.png
Well, it’s a much better time to buy stocks than anytime last year when tech stocks were at an all time high and everyone was telling everyone else to invest in the stock markets.
Actually Bitcoin and Ethereum have a known supply and limited inflation (Ethereum is actually deflationary now) so best suited to not go to zero. The USD on the other hand…
With stocks, you're purchasing future profits. That puts a floor under things. With crypto you're purchasing??? There's no floor. It has limited utility.
Technically, with crypto there's always the less than legal or privacy oriented stuff. Unless you're expecting all that to suddenly disappear there's still utility to back its value there, even if not to maintain its value at the rather overinflated values cryptocurrencies like Bitcoin have (which are less practical for such purposes compared to say, Monero).
Plus, for the value to completely zero out you'd need lots of large organizations who have lots of money (be it ones who've borrowed it or ones who are 'holding' it for others) to not only run out of said money but also be unable to pull in new people with get-rich-quick schemes. Miners and stakers would also need to completely lose trust in cryptocurrency.
So, to zero it out, you would need a global economic crisis so large that it educates pretty much every 'sucker' out there, which is pretty unlikely to happen right now.
Profits are the floor, as I mentioned. Negative profits in the absence of growth means the floor is 0 and the company may go under. That a stock can go to zero does not mean there's no floor under the price, but it depends on the company as to what that is.
Crypto has not gone all the way to zero. It went from $3T mcap to ~$800 billion. Despite over a decade of people predicting Bitcoin would go to zero, it's still $20K+ per BTC. Yes, down from the $68K euphoric highs of 2021, but substantially higher than its average price for most of its history, and on par or better than many stocks have performed this year.
Ordinary crypto currencies like BTC & ETH can't go bankrupt. They never had any liabilities to begin with. The majors such as BTC & ETH have deep, global, 24/7 liquidity. If you can find a way to make all the liquidity pools dry up for crypto around the world, I suppose it will go to zero. Good luck with that.
The entire stock market has also not gone to zero. You're comparing apples to oranges. Individual coins have gone to zero, as have individual stocks. It's irrelevant to the argument I made.
No, if dollars suffer hyperinflation, companies are still worth the present value of future cash flows. They'll suffer like everyone else in a tough environment, but they won't go to zero unless the company goes bankrupt. Bitcoin, on the other hand, has next to no utility and no profits. It can go to zero.
Oil priced in dollars. Countries forced to buy/hold dollars. Country tries to use another currency to buy their oil, they end up like Saddam or Gaddafi c/o the US military.
But, the floor of profits for a company is not denominated in dollars. It is shit you put in your mouth and eat or a useful product like a refrigerator which you can put things which allow you to not die.
Bitcoin, on the other hand, is some electricity, and arguably a waste of it.
It’s nonsense to argue Bitcoin or Ethereum aren’t subject to inflation when their price in dollars has been, at best, flat, while the latter experiences record inflation.
I argue that inflation is an increasing lack of purchasing power. We're off roughly a third of the BTC peak last year, so would that not be 300% inflation looking at BTC alone?
>> Ironically, it's probably best to buy stocks and crypto when they are in valleys like this rather than at peaks.
Half the people in this Robinhood cohort are writing weekly leveraged (non-cash secured) puts and/or put spreads or long calls. With that popular strategy, one big market move and you're wiped out.
The unemployment rate was 3.5% months ago, there is a lag in government reporting. The rate can also vary greatly by industry, a laidoff software engineer is not going to be looking for McDonalds jobs.
The problem is that many people has less money to go around due to cost of goods and interest rates rising, so it's harder than ever to take advantage of lower stock market prices.
but if you followed the advice of modern portfolio theory, you would've purchased a diversified set of stocks (cap weighted) during the dotcom bubble, including companies such as google, amazon, and apple.
I think even if 99% of the purchases went to zero, you'd probably still be ahead if you're diversified properly.
The problem is that right now it's not a valley. It's a downhill slope. Once it reaches a valley, I agree that it's probably a good place to buy, but we're not there yet!
You can cost dollar average without timing anything. Essentially you discover after the fact what was the best time to invest.
Which is surprisingly hard to pull off long term as most people are forced to take money out when they run into financial issues which then correlates with down markets.
Cash is also shrinking. Loads of new investors existed thanks to the government stimulus payments. My memory is failing me but I read that after the first few stimulus checks, savings went up 33% for the average american household. (I honestly don't know what the 33% was about but it was a positive change). That's pretty much all wiped out as people lost money. I think that glut of investment was just a temporary thing
“In 2022, there were around 1.63 million software developers and software quality assurance (QA) workers employed in the United States.”.
I doubt its the tech layoffs that did it. Maybe the cost of leaving exploding led to less disposable income meaning less people willing to gamble. Also why risk your money when everything seems to be going under?
It's also the volatility. Wild swings within days and weeks. And general uncertainty about the direction of the market. The toughest trading environment for retail traders.
well, not too much. The balance sheet is still within 97.5% of its all time high. I would like to see a good model of Fed Funds X and Balance Sheet Y = Z amount of stimulus.
Yeah, I'll believe the "tightening" when I see it. Balance sheet still astronomically high. Banks are not being forced to hold dollars. Current Govt Admin spending like drunken sailors. The only difference is we have higher interest rates which is straining regular people. It's a race to see if inflation actually comes down or economy goes to shit. Or both together all at once?
Interesting thought.
Is Robinhood that common in the crypto world? I know they support it, but I would have guessed it was an “also” feature rather than a driver.
I believe the reason for the correlation with crypto market and Robinhoods active user count be the demographics of people who invest heavily in crypto;Gen X, millennials and zoomers. Thoughts ?
Could be. Regardless of age, beginner investors will have an easier time understanding crypto. There’s only one thing to understand, either many people will use crypto or not (adoption increases, increasing the value of the coin). Easy to understand.
Compare that to EPS and Net revenue of Boeings third quarter results and forward guidance.
> Rising interest rates helped lift quarterly net interest revenue to $128 million, more than doubling from the same period a year ago. Chief Financial Officer Jason Warnick said the company has about $17 billion in assets that generate interest revenue.
While Robinhood used to pay a competitive interest rate for cash in the account, it is now 1.5% while Fed risk-free rate is now 3.75%+. You need to pay for Gold subscription to access the decent interest rate.
Square/Block/Cash App also just announced a huge boost in profitability.
While it wasn't feasible in the last years of zero interest, now, digital wallets are profiting off the difference of giving you 0 - 1.5% interest of your sitting cash while they pocket 3.75%+.
The current I-bond composite rate is 6.9%: https://treasurydirect.gov/savings-bonds/i-bonds/i-bonds-int... . (Usual one-year lockup for I bonds, plus a 3 month interest penalty for redemptions before 5 years, and there's a relatively low limit per person per year. Still.)
I might be wrong, but most of these programs have partner banks, which take part of the revenue for themselves. I think it's more likely they make Fed Funds minus some take rate from the bank, so maybe Fed Funds - 0.50bps. Point still stands, but I don't think they're making 3.75-4%. Wealthfront is passing through 3.30%, so likely only making 0.25bps on that cash.
I've been back and forth over robinhood vs fidelity vs IBKR for a few years now.
I do not do any heavy day trading, but I do like to buy a few shares of things throughout the day, every day.
As a consequence, the user experience in mobile form factor is a big aspect for me. I understand for any professional in the space, this is perceived as lunacy. I am no professional.
Once IRA support is added, I'll be locked in for life. I don't understand how someone can use the fidelity or IBKR mobile apps and think "yes this is all ok" after spending 5 minutes in the RH app.
RH was a joke from the start. To invoke a no true scotsman, I know literally zero actual traders using the platform. Value investors like Schwab for it's customer service. Sometimes they prefer other firms (Fidelity). Day traders, etc almost universally use Interactive Brokers. Having done some profitable trading in my day I can tell you that IB's platform is arguably the best if your capitalization is less than 500,000 (at these capitalizations you can often find more bespoke brokers with even better access than IB, especially in futures). Their "pro" tier allows direct exchange access, and their API is complete (though antiquated). I'm not sure if they still do it but I distinctly remember them offering a FIX API if you wanted as well. IB's pro features do take some money. You have to pay for exchange access, and you pay per leg. But, as the saying goes, if you aren't paying you are the product (pfof).
RH made it's money through pfof and capturing COVID relief checks.Their brilliant corner in the market was a frontend app so easy to use that you wouldn't even think about the money you're losing. Since RH's release, most brokers offer similar (if not equal) platform usability and RH's lunch has been completely eaten. I would be surprised if it survived a few more years before either going under or being cannibalized by actual brokers.
RH (and presumably other commission-free brokers) sometimes beat the competition on transaction costs, particularly with low-priced contracts, or where you stand to benefit from blending in with other naive option traders. I maintained cash with them just for that purpose, for a while.
As that's no longer applicable for me, I find more and more reason to move all my accounts to Interactive Brokers. The entire history of their nickel-and-diming fees was easily paid for by letting me enter a single position one day in 4AM-7AM pre-market trading hours, which those other basic brokers (including IBKR Lite) don't support.
RH's health is fine. They are still getting positive net deposits, and they're still adding features. It's a great business to be in. They have insanely high margins and their customers' default behavior is to put more money into them. Once they have IRAs, there won't be a good reason for normal investors who just bag-hold stocks to switch away. They have $6 billion of cash, which gives them a ton of runway.
> You don't see Vanguard or Fidelity losing a third of their userbase in a year.
I can't read the article, but you define "monthly active users" as a user exiting the platform i.e. pulling their money out?!
Originally, I had assumed it was "users who don't open the app/website" but expectation difference caused me to look it up:
> Robinhood defines a monthly active user as a "unique user who makes a debit card transaction, or who transitions between two different screens on a mobile device or loads a page in a web browser while logged into their account, at any point during the relevant month. A user need not satisfy these conditions on a recurring monthly basis or have a Funded Account to be included in MAU." [0]
I have a Vanguard, I haven't opened it in a month. By the above MAU definition, Vanguard lost me too.
Again, this _alone_ doesn't tell us that RH is doing poorly vs other Retail Brokers. They could be, but not enough info.
My take is - most people don't want to see their ultra red portfolio and are just not opening the app.
If you have a balance of $1, wouldn’t you be counted as an active user ?
It sounds to me that an active user is someone with funds or that interacted with the app/website while logged in. I’m not sure the second category made much sense to begin with (unless you wanted to inflate the numbers during a bull run)
This is a contrarian response. Funding $1 would require me to visit the website so I would have been a MAU without even funding. Conversely, funding without visiting the website requires real effort.
No metric is perfect nor stands alone. What does it mean in context to RH, FB, Apple? The value of a MAU is relative. The key is it's well defined, stable and trackable over time. Assigning value is up to diligence at that point.
You may have funded the account last year and did nothing with it. My understanding is you would still count as an MAU even if you didn’t interact with RH.
It starts out with "A user need _not_ satisfy". They're saying funding has nothing to do with MAU. The language is pretty clear - "while logged into their account, at any point during the relevant month".
If you don't like it, I get it, but you've offered nothing than "I say they're shady!"
Exactly this. RH has a business model closer to casinos than it does to Schwab or Fidelity.
The headline feature for RH is "fee-free trading" which is fine, but once you read past the headline you'll come upon a vast amount of gamification, calls to action, and every other tool borrowed from gacha games and gambling generally.
In that vein I would expect their corporate performance to track more closely with gambling and F2P gaming peers than they would track more established stock trading apps.
More cynically RH's product was making people feel like geniuses in a bull market. The bull market is now gone.
Vanguard pioneered the low cost index fund and Schwab was one of the original "discount brokers". Their innovations were adopted by every other broker, driving down costs for the small trader. They remain allies of small investors.
Vanguard's got excellent funds and ETFs, but they're legendary in terms of having some of the worst customer support for their brokerage account.
Schwab/TD Ameritrade on the other hand, has kinda bad ETFs but have really good customer service. Besides, you can buy Vanguard ETFs / Mutual Funds in your Schwab account.
Go for customer service. There's some minor benefits in terms of how quickly you can enter / exit Vanguard positions if you get a Vanguard account, but overall its a better idea IMO to get a brokerage account with humans on the telephone whenever issues come up.
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I'm also in E-Trade and they've worked out so far for me.
The one I'm most interested in is probably Fidelity? Good overall reviews, apparently pretty good customer service, and the ETFs / Mutual Funds / Bonds they offer seem pretty good too.
I tried to set up an online account with Vanguard recently. At the end of the signup flow, I got an error saying I had to phone it. It was a weekend so I tried a couple days later during business hours just to be sure and because I loathe dealing with human beings for stuff that should be able to be handled by a website. Same result.
So I phoned in, spent a half-hour with a human being. He was audibly cursing as he tried to get me set up. At one point, after I had given him my name and other PII, he addressed by a different first name then quickly corrected himself.
At the end, he said, "Ok, now you'll get an email to finish setting up your account." Email arrived and it was addressed to someone with a different name. I recognized the first name as the same name the agent had mistakenly used with me.
Suffice to say, I did not finish setting up my account and decided to stick with Fidelity.
It's probably uncommon to deal with a human at Vanguard. I know I never have.
Plus, I have my own story about Robinhood - they couldn't or wouldn't change my email address. I think they expect users to upload pictures of ID and such.
That's crazy and completely disqualifies them for anything serious, for me.
If something is really important, then you do it in person, with a local representative or notary or something.
If it's not that important, then they don't need ID theft material in digital format. They already leaked the info they have!
It is not a feature to have the ability to make critical changes without friction from anywhere in the world over the internet, with the right bitstream. It's completely unacceptable.
My entire relationship with Robinhood involves a trivial amount of crypto that I don't trade, on the assumption they are the (one of the) most government compliant or least shady ways to hold that. That is based on my outlook being the complete opposite of the cliché "not your keys, not your coins".
Other than my "free stock" I don't own any non-crypto and never will.
Confirming my negative attitude was their recent data breach, which we will never know for sure the scope of, but I suddenly started getting investment scam spam from known scofflaws at the email address Robinhood has and probably leaked.
The SEC has a "catch and release" program for even small-timers; it sure is a disincentive to report criminal activity when you see in the public record someone already was caught and paid a fine and kept right on keeping on.
I've been a Fidelity customer for 15+ years. Amazing customer service - very easy to reach humans and they were all experts at solving whatever problem I called them with.
Fyi - Vanguard is only good for simple, long term holding. If you are interested in a little more day trading type activity, then Schwab, TD, and Fidelity are much better.
Fidelity, Schwab and Vanguard in that order. All 3 offer ETFs at $0 fees, and all have comparable index funds. I've found Fidelity's website to be the most usable, followed by Schwab. Vanguard had a dated, but simple and functional interface that they've recently revamped to be more slick but less usable.
Interactive Brokers. If you are an occasional trader, go with the Lite option - it is commission-free but relies on pfof, just like RH. If you are more serious, go with Pro and you'll get routing to exchange in most cases.
TWS (their desktop app) has many options and target pros. However, I haven't used their web/phone apps.
> If Robinhood had to close shop
I doubt that will happen. Citadel will jump in and inject money, just like they did with Plotkin's Melvin Capital.
Fidelity. Very nice desktop and mobile apps. Trustworthy and established. Robinhood cant even be compared to it. While you are at it, get yourself some FNILX stocks and collect dividends on an index.
Let me say RH is fine, and you shouldn't be buying options unless you have a big margin of safety anyway. It depends on the exact order, but for me Fidelity has, in my typical use case, gotten better fills with price improvement than Robinhood has. It takes one penny of improvement to overcome the commission.
They have a big pile of cash, and at their current burn rate, they'll last for a long time. They have huge margins and their loss is from fixed cost R&D. They're receiving positive net deposits from a relatively young customer base and the total assets they have under management is growing.
To add some numbers: they're burning $175/quarter, which includes severance payouts from their recent layoff, on $6954 of assets, which includes a $6187 pile of cash. So that's 8.8 years of runway if they didn't cut costs or grow revenue further.
And their product also has a ton of room to improve -- once it gets IRAs, that would remove the main reason its more boring customers find other brokers.
I’d say it’s extremely unlikely that Robinhood would actually close shop. Worst case, they get bought for a pittance and customers get migrated over 12-24 months.
I transferred from Robinhood to Fidelity years ago and never looked back. Mobile app and website work great, had to call customer service twice and they were always helpful, good ETF screener tool. They have local branches in most major metro areas for in-person customer support as well. Commission-free trades just like Robinhood. Seamless integration with most tax software.
I just pile leftover savings into Small-Cap Value funds though, so my needs are rather minimal.
Schwab is great. One thing I like is you need to call their team on the phone and answer a few questions before you can even trade the most basic option types (i.e. secured short put, covered call). Robinhood instead grants margins and advanced option strategies to 18 years old willy nilly. And as others have mentioned, they have great customer service. I can contact them with live chat during trading hours very quickly.
They're merging, so it doesn't really matter a super lot which one you choose. I switched to TD Ameritrade because I like their UI better, but this time next year they'll both be the same thing.
If the goal is to have your portfolio on autopilot with index funds, Fidelity’s zero-cost FZROX, FZIPX, FBILX and FZILX are only available through Fidelity itself.
interactive brokers 100%. best rates you can get on margin, high quality tech. be aware they will sometimes move margin requirements and give you limited time to cover if something starts looking sketchy, sometimes a bit more aggressive than other retail brokerages. but not a problem if you manage right.
I don't think Robinhood had any choice there. Trades don't settle instantly. Robinhood needs to post collateral with the Depository Trust & Clearing Corporation while settlement is pending, and the required collateral goes up with volatility. During the "GameStop debacle" they had to raise billions of USD in additional capital for this purpose, so no wonder they had to hit the brakes.
Blocking selling is a good way to get sued, so brokerages are very hesitant to do it. If the price drops the trader can claim they wanted to sell and are owed the difference. Blocking buying doesn’t have this issue since you can’t sue for theoretical gains.
In the context of what was happening in the market (the "short squeeze" that may or may not have ever happened), allowing sells but not buys clearly biased one position, could be seen as interference.
You are the product for Robinhood, as they are selling deal flow.
Vladimir Tenev will always put his customers first since they are paying for the deal flow information.
How can you trust any company that has you as the product?
You'll be shocked to learn that Robinhood also collects interest on your cash deposits and charges interest when you borrow money on margin. And gosh, other brokers like Fidelity also often route orders to Citadel. They're filling orders at the advertised prices, and following your limit price, are they not?
You could cry you don't like their prices or you think another broker offers better transaction costs, features, or fees, but talking about "trust" is a baseless smear.
i think this has more to do with the market tanking. nobody wants to log on to a sea of red. robinhood didn't start doing anything new as of september to drive people off.
