Why Did Reddit Trigger a GameStop Stock Surge?

[phinds]

It's up to $62. Because stonks only go up!

$80+ at 10am. Others of the "reddit stocks" are also up noticeably

 

[Vanadium 50]

Clearly the fundamentals of the companies have improved enormously since...yesterday.

 

[Vanadium 50]

Let me discuss GameStop valuation for a moment. Let's compare with Best Buy, a $29B company. Best Buy is profitable and growing. GameStop is neither. I'd compare price-to-earnings, but that's not possible, since GameStop doesn't have earnings. So let's discuss price to sales. For Best Buy this ratio is about 0.65. At $73.80, for GameStop it's 0.80.

So, despite being unprofitable, somehow GameStop is 25% more valuable (per unit of sales) than Best Buy?

I think reasonable people can disagree whether the "true" value (whatever that is) is somewhere between $20 or $30 and zero. Was its 52-week low of $2.57 too low? Probably. That's probably true for most company's 52-week low. Was the $10.47/share at the end of October too low? That's debatable.

Is there money to be made by investing under the assumption GME will return to something closer to its pre-mania value? Certainly. But as a wise man once said, "The market can stay irrational longer than you can stay solvent."

 

[BWV]

Clearly the fundamentals of the companies have improved enormously since...yesterday.

Or clearly the discount rate applied to future cash flows declined

 

[kyphysics]

Aswath Damodaran (NYU Professor of Finance) - called "The Dean of Valuation" on CNBC and about as "scientific" as they come when doing fundamental analysis - gave a "best case" valuation of GME at $47.00 (for a successful turn-around story under Ryan Cohen). He said he could see a super optimistic valuation up to the $140's range (given higher revenue and higher margins - see chart), but no higher.

As a Twitter follower says, "He's never wrong." (actually, he has been occasionally, but he's rarely wrong...his inputs into his discounted cash flow analysis are always reasonable and he offers highly conservative and highly optimistic book end ranges to sandwich his moderate inputs).

I've followed him and whenever he's recommended a buy, it's almost always been very correct (netting HUGE gains). . ...FB...GOOGL...TSLA...NVDA...

If you ever disagree, he always invites anyone to use their own inputs into his spreadsheet. You have to prove him wrong with numbers.

 

[mfb]

Clearly the fundamentals of the companies have improved enormously since...yesterday.

Clearly they have enormously declined in every single day you posted updates before.

Do we need a daily update "people are still wildly speculating with GME"? Everyone is aware of that.

So, despite being unprofitable, somehow GameStop is 25% more valuable (per unit of sales) than Best Buy?

25% is a surprisingly small difference, especially for an essentially random snapshot in the middle of speculation. Take any other set of companies and you'll find tons of companies 25% apart.

 

[Vanadium 50]

Why are you in attack mode? And why have you been in this mode all wek?

Seriously. I'm with Russ here. If you have something to say, come right out and say it. You want to disagree, fine. Tell everybody what you think. Maybe you'll convince me, maybe you will convince other people, maybe you won't. But this dancing around it isn't helping communication.

Oh, and do we need a daily update? Probably not on the weekend.

 

[russ_watters]

Oh, and do we need a daily update? Probably not on the weekend.

Granted, no, not on the weekend, but otherwise I appreciate the daily updates of such an interesting/unique phenomena. I've never watched a stock ticker so much in my life; not even one I've owned.

 

[russ_watters]

I don't think that's necessarily true. There are counter-examples: loan sharking, prostitution, minimum wage.

Ok, but I thought we were talking about stock trading. I'm not interested in discussing the morality of prostitution or even video games. I realize there are people who choose to use their trading to send messages about morality, but I'm not one of them and I think they are a small minority. If that's where this is going, I don't think I can provide any insight. As I said, I know I'm not really the target audience for the original question...

But those are highly regulated. Furthermore, one cannot simply snap one's fingers and buy or sell a substantial fraction of a company.

Small numbers of large individual transactions, no, but the entire point of the past few weeks is that massive numbers of smaller transactions can substantially impact the price. On the other side of the coin, the redditors, at least at face value, believed that the hedge funds were manipulating the stock (to drop) through the combined power of their transactions. Not as much as the redditors claim to believe or as the redditors were able to accomplish themselves (to raise it), though. Ostensibly, what we had here is two sides fighting each other to manipulate the stock in opposite directions.

Indeed, the Robinhoodlums (I know it's Reddit, but I couldn't resist) noticed that because of others' positions, GME was relatively illiquid, and a smaller-than-average purchase would produce larger-than-average swing.

You give them that much credit? Hmm, I guess its possible...

A short moves the price down just as a sale does. It's a creatively financed sale. Why is one good and the other evil? ]

Again, it's the coordination with a purpose. If I sell some stock because I need the cash, I'm not purposely trying to harm the company, and the amount of harm due to my tiny sale is insignificant. If a group of hedge funds decide to short GME and the price goes down, which makes them more money which they can use to attack GME further, that's intentionally harming GME to profit from the harm. Even if it isn't directly coordinated, it is still a group of opportunistic bullies, beating-up on poor, innocent, defenseless GME.

It is it just "Rich people do it, and i don't understand it, but I know I don't like rich people, so..."

Yes, I think that's the underlying reason. The redditors believed the hedge funds were engaging in a coordinated attack against a company they liked, and that made it "bad". They were defending GME and that makes them "good". But like I said, I'm playing devil's advocate here, so you'll have to wait for one of the apparent proponents of that position to lay claim to it.

 

[Vanadium 50]

I realize there are people who choose to use their trading to send messages about morality, but I'm not one of them and I think they are a small minority.

Maybe more than you might think. There is about $250B invested in SRI (socially responsible investing) and ESG (environmental, social, governance) funds. But that's a side issue.

I think your devils advocate-ee needs to ponder a few things:

• If stocks can be said to have a price - at all - that prices needs to be able to move up and down with supply and demand. Just like tomatoes and aluminum foil.
• Companies don't go out of business because their stock prices go low. Companies go out of business because people stop buying their stuff.
• You can't put restrictions on sellers without those same restrictions applying to buyers. If you can't sell something, I can't buy it from you.

If the devil's advocate-ee believes the "Wall Street Fat Cats" were colluding, that's illegal. The solution is not to collude them right back. Especially if the evidence is "everybody just knows they done it". That's not justice. That's lynching.

In this case, I would also argue that the primary effect is to transfer wealth from one group of "Wall Street Fat Cats" to another. So if the goal is "to stick it to The Man", it's kind of a failure.

All that said, I do have a problem with short sales. What is usually described (and indeed, I described it this way) is that A borrows stock from B, sells it to C, waits, buys it back from D, and returns it to B, with a little extra for B's trouble. That's not exactly what happens. What actually (usually) happens at the retail level is A tells is broker X he wants to short, so X borrows stock from B without telling him (more on this later), and sells it to C. Later A tells his broker to buy it back from whomever, so X buys some from D and places it back in B's account. The fee that goes to B's account in the simplified scenario ends up in X's pocket.

Worse, if there was a dividend when B thought they owned the stock but it was out on loan, he doesn't get it. He gets "cash in lieu" instead. Why does he care? Usually taxes are less favorable this way.

So why would B agree to all this? It was in the fine print in his agreement to getting a margin account. If he is at the moment borrowing anything - cash or stock - from his broker, the broker can loan out his shares and keep the proceeds. Those "free" trades? The brokerage isn't working for nothing - they need to make money somehow. This is how they do it. It's legal, but it's unsavory.

 

[mfb]

Why are you in attack mode? And why have you been in this mode all wek?

For once I mimicked the posts you made regularly (mainly to show you how they look when they don't come from yourself), and suddenly I'm in attack mode?

 

[Vanadium 50]

At least that's an answer. An answer that I think says more about you than me, but at least it';s an answer.

 

[Vanadium 50]

You give them that much credit? Hmm, I guess its possible...

I was thinking more along the lines of "stumbled upon" but given Gill's financial background, job and licenses, the probability that this wasn't somebody just wandering into it has gone up in my mind. But I will concede there is a selection bias: somebody touts a declining stock and it continues its decline, and nobody takes notice.

There was a similar run up on Hertz (HTZGQ). The Q means "bankrupt", and it is pretty clear that the folks pushing it on the internet were either a) unsophisticated, or b) wanted to appear unsophisticated. The ability of Hertz to emerge from bankruptcy as a viable company has nothing to do with the value of HTZGQ because it will be a new company with new shares but the old name. The HTZGQ shares will be worthless - arithmetic says so, the judge says so, and even Hertz says so. Yes the stock jumped more than a factor of 2 in October and again in December (after having gone down in between).

 

[Vanadium 50]

Doesn't that also protect individual investors from themselves?

I'd be interested in your opinion on exactly what the brokerages' responsibilities are here.

 

[stefan r]

The redditors believed the hedge funds were engaging in a coordinated attack against a company they liked, and that made it "bad". They were defending GME and that makes them "good".

That is not really what I was seeing on reddit. GME was shorted more than 100%. The statements "I just like the stonk" was do to SEC oversite. It went with "This is not financial advice".

The moral stuff was only relevant as a justification for pillaging them while they are exposed. If someone has their pants around their ankles and you run off with their wallet that would be morally bad. The hedge funds in question run off with people's money every day. It was not insider trading because the short interest was posted up on the big board where everyone could see it for months.

 

[russ_watters]

That is not really what I was seeing on reddit. GME was shorted more than 100%. The statements "I just like the stonk" was do to SEC oversite. It went with "This is not financial advice".

The moral stuff was only relevant as a justification for pillaging them while they are exposed. If someone has their pants around their ankles and you run off with their wallet that would be morally bad. The hedge funds in question run off with people's money every day. It was not insider trading because the short interest was posted up on the big board where everyone could see it for months.

[edit; missed it] You're saying they did it primarily to "steal" money from the hedge funds? Do you have any examples of posts where a strategy for that was described? Because I don't think I ever saw one.

Here's the flaw in that: in order for a Redditor (or anyone else) to make money they had to buy low and sell high. The lack of a strategy to sell high was overt/conspicuous feature of what happened. The only conspicuous end-game I saw was the lack of an end-game: "hold".

Anyway, I saw a ton of posts from people who said they were doing it to harm the big, bad hedge funds, and if they also lost money in the process, that was OK. (If contradictory)

I also saw entire threads that were filled with nothing but "I like the stock" over and over and over again. As far as I can tell, they were empty of thought/content.

 

[Vanadium 50]

The hedge funds in question run off with people's money every day.

Can you clarify (and justify, keeping in mind there are two sides to every trade) that statement? How does this happen? And are we talking about every hedge fund? Most? Many? Some?

 

[Vanadium 50]

GME was shorted more than 100%

I see this a lot. So much so that I think many people misunderstand what it means.

Shorted stock is borrowed stock. Let's look at the same thing with a physical item, say a snow shovel. Andy, Betty and Charlie are neighbors, and Andy and Betty own snow shovels. It snows, so Charlie borrows a snow shovel from Betty. Betty then borrows one from Andy. 100% of the snow shovels are now borrowed.

Had instead Charlie borrowed the shovel directly from Andy, only 50% of the snow shovels would be borrowed.

With a little effort. one can work out a scenario where everyone has the exact same shovels (not just number of shovels) as when they started, but the shovel borrowing rate is over 200%.

The fact that short interest is greater than 100% says there is a lot of interest in selling the stock. No doubt about that. But there is nothing magic about the 100% number - nothing is happening at 100% that wasn't happening at 99%.

 

[mfb]

There is nothing magic happening at exactly 100%, but over 100% is a very large short interest. If it would be over 200% people would highlight it's over 200%, but it's not.

 

[Vanadium 50]

Anyway, I saw a ton of posts from people who said they were doing it to harm the big, bad hedge funds, and if they also lost money in the process, that was OK. (If contradictory)

Probably easier to just pool that money that would be lost and hire a guy who...you know...removes problems. I know a guy who knows a guy...

 

[Vanadium 50]

@stefan r , have you given any more thought to my question? @russ_watters ?

You can see people who have lost their life savings gambling on investing in stonks. Some are asking for help on gofundme and their ilk, having lost their life savings in this chaos. What was the responsibility of the brokerages in this?

Oh, and GME is at $49.69 (down 5%, SP500 unchanged).

 

[Greg Bernhardt]

What was the responsibility of the brokerages in this?

none, same as the casino

 

[russ_watters]

none, same as the casino

I would tend to agree, but Robinhood got criticized for preventing users from buying at $400 a share. Was that fair, or should they be praised? Or is it more a thanks, but no thanks, situation?

 

[Greg Bernhardt]

I would tend to agree, but Robinhood got criticized for preventing users from buying at $400 a share. Was that fair, or should they be praised? Or is it more a thanks, but no thanks, situation?

I don't know the regulatory policies a brokerage has to comply with but in my mind, it's my money, my responsibility. If I want to put a $400 bet down at the blackjack table. That is my choice and I'd be pissed if the casino was like "nah man". I get that there was unprecedented manipulation going on, but that needs to be handled with new regulations perhaps, not the brokerage making judgement calls.

 

[Astronuc]

What Really Happened When Robinhood Suspended GameStop Trading?
https://finance.yahoo.com/news/really-happened-robinhood-suspended-gamestop-130358363.html

When certain stocks become volatile, for example due to a coordinated effort to purchase them and boost their price, the clearing firm might charge more to settle the trades. Apps like Webull, M1 and Public all cited clearing firm charges when they suspended the trading of stocks like GME last month.

So Robinhood was not alone or unique.

 

[phinds]

none, same as the casino

+1 on that

I'm against any kind of nanny state regulations that try to keep idiots from being idiots.

 

[mfb]

but Robinhood got criticized for preventing users from buying at $400 a share.

It did not. Robinhood got criticized for preventing users from buying shares. Independent of which share, independent of the current price of that, and certainly independent of the future price evolution of it. A future price evolution that was partially influenced by the action of Robinhood and other brokers, of course.

Oh, and GME is at $49.69 (down 5%, SP500 unchanged).

It has been around $50-60 since February 4. It's still somewhat volatile, but nothing like the situation 2-3 weeks ago.

 

[russ_watters]

It did not. Robinhood got criticized for preventing users from buying shares. Independent of which share, independent of the current price of that, and certainly independent of the future price evolution of it.

Nonsense. You can't make the context go away by ignoring it.

 

[mfb]

You think Robinhood wouldn't get criticized if it stops users from buying Alaska Air tomorrow? How much does context matter if it gets criticized for stopping any stock at any time?

The trading stop of Gamestop got far more attention because it had a far larger impact, of course.

 

[russ_watters]

Well, since we're back at it, I'd neglected to respond to this:

I think your devils advocate-ee needs to ponder a few things:

• If stocks can be said to have a price - at all - that prices needs to be able to move up and down with supply and demand. Just like tomatoes and aluminum foil.
• Companies don't go out of business because their stock prices go low. Companies go out of business because people stop buying their stuff.
• You can't put restrictions on sellers without those same restrictions applying to buyers. If you can't sell something, I can't buy it from you.

I do indeed believe that a significant fraction the Reddit crowd involved misunderstands at least two out of the three. I think the fundamental misunderstanding that drove the shenanigans here was Bullet #2.

If the devil's advocate-ee believes the "Wall Street Fat Cats" were colluding, that's illegal. The solution is not to collude them right back. Especially if the evidence is "everybody just knows they done it". That's not justice. That's lynching.

Lynching can't be justice? The System can't be stacked against the little guy? For my part, I don't disagree in principle with the concept of a righteous mob. But in this case, I believe the mob was both wrong on the ethical judgement and dumb to believe they could ultimately win.

In this case, I would also argue that the primary effect is to transfer wealth from one group of "Wall Street Fat Cats" to another. So if the goal is "to stick it to The Man", it's kind of a failure.

Agreed. The saddest/dumbest comments I saw were from those who were down 85% and still said it was worth the loss based on the "principle" of it all. They basically handed someone else a big bag of cash and still believe they "stuck it to him". And there were a lot of those posts.

 

[russ_watters]

You think Robinhood wouldn't get criticized if it stops users from buying Alaska Air tomorrow?

Of course!

How much does context matter if it gets criticized for stopping any stock at any time?

I'm not even sure how to respond to that. The same action in different situations can have different motivations and can and should be judged differently. That's what "context" means.

 

[mfb]

Of course! That's called context.

I asked in the negative, now I'm not sure how to interpret your answer.
Do you think they would get criticized?
If not: You really think people would just ignore that completely?
If yes: See, different context, but same action leads to the same response. The context didn't matter.

You made an extremely specific claim. That people criticized Robinhood for stopping them from buying [GameStop] at $400. Can you show who was so specific with their criticism?

The same action in different situations can have different motivations and can and should be judged differently.

You are trying to force a specific context into a situation that was independent of it. People would have criticized Robinhood for stopping any trade, at any value, with any history. Unless the stock stops being traded altogether or other corner cases that are not relevant here, obviously.

 

[russ_watters]

I asked in the negative, now I'm not sure how to interpret your answer.
Do you think they would get criticized? [regarding Alaska Airlines]

Alaska Airlines is currently at $60. In this scenario, do they stop trading if it is still at $60 or has it suddenly jumped to $1000? That's context, and it matters.

If yes: See, different context, but same action leads to the same response. The context didn't matter.

The context matters for:
1. If the action would actually happen.
2. The motivation behind it.
3. If it would be criticized.
4. If the criticism would be correct/reasonable.

Any one of those could be changed based on the specifics of the scenario.

You made an extremely specific claim. That people criticized Robinhood for stopping them from buying [GameStop] at $400. Can you show who was so specific with their criticism?

What? I'm talking about reality here. Robinhood prevented people from buying Gamestop at $400 (about - I don't have the real number). The stock went very high very fast, and then Robinhood stopped trading on it. That's a statement of factual reality. It's what actually happened.

You are trying to force a specific context into a situation that was independent of it.

Nonsense. I made a statement about objective reality. What I said is what actually happened.

I think I see the problem here: the problem is you are reading past the facts into motivations that aren't being stated, and not stating what motivations and judgements you are reading, much less what you actually believe that is different.

People would have criticized Robinhood for stopping any trade, at any value, with any history. Unless the stock stops being traded altogether or other corner cases that are not relevant here, obviously.

Nonsense. Trading gets halted on individual stocks or entire markets at various levels, for various reasons. I don't think I've ever seen such a backlash against such a common action.

 

[russ_watters]

So Robinhood was not alone or unique.

Not that I was in the market for it, but my investment company app had a notice about trading limitations as well.

 

[BigDon]

The empathy side of me feels for the man who had to explain to a group of people he lost more than five billion dollars of their money to a man with the online name of "Asspotato".

I'd just quit and move to another country.

 

[phinds]

Robinhood prevented people from buying Gamestop at $400

Yes, but I think you are ignoring the fact that this was NOT specifically because it had gone to 400 or any other price but because they didn't have the capital to cover further trades because of the total dollar volume on which they had to cover a 2-day float. If they had had the capital there would have been no reason for them to suspend trading regardless of the price.

They make money from the back end of the trades and there would have been no reason for them to stop doing that, and I don't believe they WOULD have stopped doing that, provided that they had had the capital to cover the float for the required 2 days.

They do not lose money on trades and they have no legal or moral imperative to stop idiots from being idiots, so as far as I can see the only reason they stopped the trading was their lack of capital to cover the float.

They immediately started raising capital so they could resume trading.

 

[russ_watters]

Yes, but I think you are ignoring the fact that this was NOT specifically because it had gone to 400 or any other price but because they didn't have the capital to cover further trades because of the total dollar volume on which they had to cover a 2-day float. If they had had the capital there would have been no reason for them to suspend trading regardless of the price.

Yes, that's the cause-effect chain. You're not disagreeing with me:

• The price went way up, very fast.
• The clearinghouse requirements went up, very fast.
• They didn't have the capital to cover future purchases.
• They halted future purchases at those high prices.

They make money from the back end of the trades and there would have been no reason for them to stop doing that, and I don't believe they WOULD have stopped doing that, provided that they had had the capital to cover the float for the required 2 days.

Agreed. That's why the fiery public criticism of them we saw is conspiracy-theory-ridiculousness.

They do not lose money on trades and they have no legal or moral imperative to stop idiots from being idiots...

You and I (and Greg) do differ on the moral imperative, but that's ok. I don't think it was at play here.

 

[Haborix]

While I recognize that capital supporting trade figured heavily, if not completely, into the calculation by Robinhood, I wonder how much this story weighed in their decision making. It is easier to wave people along when it is just money being gambled and lost, but when life is lost the decisions get harder. I only offer this to say the moral imperatives may not be so cut-and-dry.

EDIT: I apologize if this has already been brought up earlier in the thread; I didn't read through the entirety of it.

 

[Astronuc]

Handful of hedge funds bet big on GameStop before its wild ride
https://finance.yahoo.com/news/handful-hedge-funds-bet-big-210132545.html

 

[russ_watters]

While I recognize that capital supporting trade figured heavily, if not completely, into the calculation by Robinhood, I wonder how much this story weighed in their decision making. It is easier to wave people along when it is just money being gambled and lost, but when life is lost the decisions get harder. I only offer this to say the moral imperatives may not be so cut-and-dry.

Whether or not such issues figured into Robinhood's actions, it surprises me a great deal to see people expressing opinions that there are or should be near zero moral imperative here or in a casino. Even absent a care about the consequences for some people, there is a fine line between enabling freedom and exploitation.

 

[Vanadium 50]

Yes, but I think you are ignoring the fact that this was NOT specifically because it had gone to 400 or any other price but because they didn't have the capital to cover further trades because of the total dollar volume on which they had to cover a 2-day float. If they had had the capital there would have been no reason for them to suspend trading regardless of the price.

But the reason they had a total dollar volume problem was because the price had gone so high so fast.

They have two days to settle. That makes this effectively a 2-day futures contract. If the stock is this volatile, the contract gets expensive - that is reflected in (or is another name for) the settlement fees. Settlement fees go way up, and a broker who has no way to pass these along to their client loses money with every trade. So they stop.

 

[Vanadium 50]

it surprises me a great deal to see people expressing opinions that there are or should be near zero moral imperative here or in a casino.

How do you fix this? Casinos aside, if you wish.

Suppose Robbinhood made you enter (correct) maximum upside and maximum downside before executing any transaction. If the client doesn't understand the implications, they can't make the transaction. Would that be desirable? Would that be practical? Did you have something else in mind?

 

[mfb]

I think I see the problem here: the problem is you are reading past the facts into motivations that aren't being stated

By posting one aspect you seem to assign importance to that aspect, if you want or not. As if Robinhood wouldn't have been criticized if that aspect had been different.

"but Robinhood got criticized for preventing users from buying at $400 a share." (your post)
"but Robinhood got criticized for preventing users from buying on Thursday"
"but Robinhood got criticized for preventing users from buying"

All three statements are factually correct, but they are not equivalent.

 

[mfb]

A hearing of the House Financial Services Committee will happen tomorrow (Feb 18).

https://finance.yahoo.com/news/roaring-kitty-sued-securities-fraud-173103369.html, but citing losses of people who bought, not their own losses. Will be interesting to see how they manage to combine these two.

 

[russ_watters]

How do you fix this? Casinos aside, if you wish.

Suppose Robbinhood made you enter (correct) maximum upside and maximum downside before executing any transaction. If the client doesn't understand the implications, they can't make the transaction. Would that be desirable? Would that be practical? Did you have something else in mind?

On that sort of individual level I don't think it's possible. There's no easy way to even know if a guy is betting his $350 part time Starbucks paycheck on a share of GME from his mom's basement, and I'm not sure we should stop that. But many in the redditor army are too young to even rent a car. It's worth considering that investors should have qualifications. The quote in the article linked by @Haborix gives an insight:

The note found on his computer by his parents on June 12, 2020 [the day he killed himself], asked a simple question. “How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?”

I don't play in that world, so I don't even really understand what happened to him, to have an answer to that, but it would seem like he should not have been given a credit line from the casino Robinhood to bet with.

Broader, I agree with the existing market circuit breakers, which were triggered dozens of times on GME stock in the past few weeks. Their basic purpose is to interfere with irrational behavior.

 

[russ_watters]

By posting one aspect you seem to assign importance to that aspect, if you want or not. As if Robinhood wouldn't have been criticized if that aspect had been different.

"but Robinhood got criticized for preventing users from buying at $400 a share." (your post)
"but Robinhood got criticized for preventing users from buying on Thursday"
"but Robinhood got criticized for preventing users from buying"

All three statements are factually correct, but they are not equivalent.

I agree those statements aren't equivalent -- it's pretty obvious, isn't it? Yup, $400 maters and Thursday doesn't (maybe informationally, but it's obvious what event we're talking about so it doesn't need to be stated). GME (not Alaska Airlines) matters too. I don't think this should be difficult to understand, but since you're laying it out, I guess you are trying to tell me you just figured out that "it" matters? Do I need to say the word again or do you get it now? Robinhood prevented redditors from buying GME at $400+ a share. Yep, every noun and verb in that sentence is a relevant "aspect". Or c______. They're all factually true and I said them because they matter.

At this point, I'm not even sure if you ever even had an actual point to make except to attack, attack, attack.
[edit]
Ehh, you actually made enough of a point I can respond to it again:

Robinhood got criticized for preventing users from buying shares. Independent of which share, independent of the current price of that, and certainly independent of the future price evolution of it. Independent of which share, independent of the current price of that, and certainly independent of the future price evolution of it
...
Alaska Air

You're saying that if Robinhood had shut down trading of Alaska Air at $60 on Thursday two weeks ago, the reddit army and Alexandra Ocasio-Cortez would have criticized them for it. I say again: Nonsense. The criticism came specifically because Robinhood's action interfered with the reddit army's attack on the hedge funds; it interfered with buying GME at $400 a share in hopes it would go higher ($69,420 was a target I saw in several posts). If Robinhood had shut down trading of Alaska Air at $60 for no reason at all, it would have been weird, but odds are the reddit army and OAC would not have even noticed.

I'm trying to figure out why you are doing this. The best I can come up with is that you are trying to defend the reddit army's actions as being something more than a stupid political, chatroom, video game, boredom-fueled lark, so you are trying to generalize the issue beyond what actually happened. It isn't -- it is what it was and nothing more.

 

[Vanadium 50]

"but Robinhood got criticized for preventing users from buying on Thursday"

It wasn't all that long ago when the NYSE was closed on Wednesdays.

t would seem like he should not have been given a credit line from the casino Robinhood to bet with.

Robinhood has a very different business model than most brokerages. Most places, you get a cash account and have to take positive action to turn this into a margin account. With Robinhood, it's the reverse. They also have no-fee options, unlike say Etrade, and this opens up a source of revenue when two clients share an options contract.

That said, what is the difference between a $1000 cash purchase of a leveraged ETF and a $2000 leveraged purchase of an un-leveraged ETF? (e.g. SSO vs SPDR) It's probably impossible to protect people from themselves. As a good friend once said, "you can't legislate common sense". The best you can hope for is limits on margin, higher requirements for pattern day traders, and so on. But every time you block someone from losing a bundle because they didn't know what they were doing, you also block someone else from making a killing despite not knowing what they were doing.

And the Robinhoodrats will not take kindly to that.

 

[Office_Shredder]

That said, what is the difference between a $1000 cash purchase of a leveraged ETF and a $2000 leveraged purchase of an un-leveraged ETF? (e.g. SSO vs SPDR)

In the one case your maximum loss is 1,000 dollars, in the other one it's 2,000 dollars. Seems straightforward to me.

 

[russ_watters]

...

Like I said, we're getting beyond my knowledge of the nuts and bolts of this to be able to suggest practical/viable constraints. [edit] I own around half a dozen individual stocks and the other ~90% of my personal portfolio is in an S&P Index fund. I keep it simple, on purpose.

It might be a cop-out but the best I can do is broad strokes and principles with some of this:

But every time you block someone from losing a bundle because they didn't know what they were doing, you also block someone else from making a killing despite not knowing what they were doing.

And the Robinhoodrats will not take kindly to that.

To me, morally, those are the same person, even if they don't see it that way.

 

[Rive]

The saddest/dumbest comments I saw were from those who were down 85% and still said it was worth the loss based on the "principle" of it all. They basically handed someone else a big bag of cash and still believe they "stuck it to him". And there were a lot of those posts.

Well, as I see it with currencies poppig up in games (so called trading included) some people started to sense currency as a game.