Current Affairs Stocks and shares and stuff

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LinekersLegs said:
Tbh much as I think Robinhood have mishandled this, their liquidity issues that froze buying of GME shares may have stopped more inexperienced retail traders from losing even more money.
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Absolutely. This is the problem with trying to take on short sellers - they can afford to lose money, it’s those that can’t afford to lose money who are the ones who lose out most. There’ll be a fair amount of retail investors who will have made a lot of money from GME by selling at the highs, but there’ll be many more who have been taken for a ride.
 
LinekersLegs said:
You can argue that real time settlement is something that we should have the technology to do now but this seems like just trying to pass the buck for poor company management
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I don't even think it's fair to blame company management. I blame Congress and the SEC.
The regulations are not intended to cover something like this. They actually create, then quickly remove, the entire problem.

The short squeeze is what drives the price up, and the margin calls at the first decline are what reverse the rocket's momentum and send it hurtling inevitably to earth. Both of those outcomes are a direct result of present regulations - the boom and panic are both the result of the government telling a bunch of investors, at the same time, that they must do something. This in turn sends a clear signal about immediate price direction, with funds flowing into the situation accordingly.

No sane trading house would keep the kind of funds on hand necessary to deal with a disruption of GME's scope proportionate to the size of their business. See: crisis, financial, 2008.

The clearinghouses are an antiquated parasite that the major trading houses tolerate because they represent both a barrier to entry (reserve requirements) and a degree of stability. Real-time settlement is great until someone introduces a virus that wipes all the records, and you have actors on both sides incentivized to misrepresent their records for profit. Decoupling trading and settlement records provides some insurance against that sort of attack.
 
Martin Alvito said:
I don't even think it's fair to blame company management. I blame Congress and the SEC.
The regulations are not intended to cover something like this. They actually create, then quickly remove, the entire problem.

The short squeeze is what drives the price up, and the margin calls at the first decline are what reverse the rocket's momentum and send it hurtling inevitably to earth. Both of those outcomes are a direct result of present regulations - the boom and panic are both the result of the government telling a bunch of investors, at the same time, that they must do something. This in turn sends a clear signal about immediate price direction, with funds flowing into the situation accordingly.

No sane trading house would keep the kind of funds on hand necessary to deal with a disruption of GME's scope proportionate to the size of their business. See: crisis, financial, 2008.

The clearinghouses are an antiquated parasite that the major trading houses tolerate because they represent both a barrier to entry (reserve requirements) and a degree of stability. Real-time settlement is great until someone introduces a virus that wipes all the records, and you have actors on both sides incentivized to misrepresent their records for profit. Decoupling trading and settlement records provides some insurance against that sort of attack.
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Agree on some of the general points but still think Robinhood‘s deceptive practice of shoving everyone into margin accounts (regardless of whether they understood the risks or even if they were in one) and encouraging the use of options dramatically increased their own specific business risk compared to their peers.
 
LinekersLegs said:
Agree on some of the general points but still think Robinhood‘s deceptive practice of shoving everyone into margin accounts (regardless of whether they understood the risks or even if they were in one) and encouraging the use of options dramatically increased their own specific business risk compared to their peers.
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I was originally going to post exactly that but deleted the point and explanation as excessively technical.

However, I point the finger at Congress (and, by extension, the people) on that one as well. The Securities Act of 1934 doesn't prohibit the causes of the 1929 crash. It just makes it harder for the result to obtain. If Robinhood's vision of free trades financed by margin fees were to obtain throughout the industry, we'd be primed for 1929 all over again.

Similarly, the notion that broker-dealer reps need to be licensed, but that retail investors don't need to pass a stripped down version of the relevant section of the SIE to personally trade stocks/bonds/options/use margin/etc. is completely insane to me, and it's on Congress or the SEC to rectify that.
 
Martin Alvito said:
I was originally going to post exactly that but deleted the point and explanation as excessively technical.

However, I point the finger at Congress (and, by extension, the people) on that one as well. The Securities Act of 1934 doesn't prohibit the causes of the 1929 crash. It just makes it harder for the result to obtain. If Robinhood's vision of free trades financed by margin fees were to obtain throughout the industry, we'd be primed for 1929 all over again.

Similarly, the notion that broker-dealer reps need to be licensed, but that retail investors don't need to pass a stripped down version of the relevant section of the SIE to personally trade stocks/bonds/options/use margin/etc. is completely insane to me, and it's on Congress or the SEC to rectify that.
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For me it takes two to tango - you can blame Congress for the situation existing whilst still blaming Robinhood for exploiting it in such an egregious manner.

Tbh I may not be looking at this entirely rationally - I’m seething mad at that firm as I feel they have led to a lot of naive investors losing money they could ill afford to and yet have waltzed off with an expanded user base and new financing to repeat the cycle all over again whilst they skim off the order flow.

In contrast I’m somewhat inured to Congress action, or in this case inaction, annoying me!
 
Don't know if this was mentioned but I watched this really closely as I bought 2 shares. Got my ass handed to me but it's money I don't get destroyed losing. But the way the stock was blatantly manipulated was really eye opening. Multiple times today the stock was halted in the way up. There was one spot it went from $97-150 and it was halted. Yet it dropped immediately and all day big losses everywhere with no halt. Yesterday the stock was halted twice, once going down "too fast" and one where it took off, again.

As Carlin said it's a rich mans game and we're not invited.
 
riddick said:
Don't know if this was mentioned but I watched this really closely as I bought 2 shares. Got my ass handed to me but it's money I don't get destroyed losing. But the way the stock was blatantly manipulated was really eye opening. Multiple times today the stock was halted in the way up. There was one spot it went from $97-150 and it was halted. Yet it dropped immediately and all day big losses everywhere with no halt. Yesterday the stock was halted twice, once going down "too fast" and one where it took off, again.

As Carlin said it's a rich mans game and we're not invited.
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It has been a while since I was in the weeds so someone chime in if this is incorrect but iirc early morning/end of day trading had different triggers on when volatility trading halts are called - if true that might be a factor.

Not meaning to dismiss Carlin’s overall message however.
 
riddick said:
As Carlin said it's a rich mans game and we're not invited.
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I'm not sure that I agree, though as usual there is wisdom in what he says.

It's a bit like chess - the legal rules are transparent, but you're not going to get to the top without some external help along the way.
The easiest/most efficient way to get that help is to have the money to solicit competitive bids for the assistance, and for your family to have the money/local knowledge to get you the education that puts you on sound footing for understanding the game.
 
Martin Alvito said:
I'm not sure that I agree, though as usual there is wisdom in what he says.

It's a bit like chess - the legal rules are transparent, but you're not going to get to the top without some external help along the way.
The easiest/most efficient way to get that help is to have the money to solicit competitive bids for the assistance, and for your family to have the money/local knowledge to get you the education that puts you on sound footing for understanding the game.
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You know the easiest way to make money? To have money to begin with.

If you start love with $5m and you went it to grow you can easily grow it to $10m, $25m, whatever.

You start with $5k? You're never getting anywhere really without a TON of luck.
 
riddick said:
You know the easiest way to make money? To have money to begin with.

If you start love with $5m and you went it to grow you can easily grow it to $10m, $25m, whatever.

You start with $5k? You're never getting anywhere really without a TON of luck.
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The risk free rate is a perfect example of this idea. You are rewarded just for having money.
 
riddick said:
You know the easiest way to make money? To have money to begin with.

If you start love with $5m and you went it to grow you can easily grow it to $10m, $25m, whatever.

You start with $5k? You're never getting anywhere really without a TON of luck.
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People who start with no money (relatively) tend to be infinitely better at capital allocation than those who do start with it. This is why the richest people in the world are the likes of Buffett, Bezos, Musk and Gates and not the Duke of Westminster.
 
Mainstream media (I don't mean your cnbc, fox business who had been crying all week over the unfairness of it all) has a share of the blame in the buyers losing money. It had been the story all week, yet they only started to cover it on Friday evening.

Also can't believe that Jimmy Kimmel actually said it was the Russians doing this. He'll be one of the first in line for the execution, for betrayal, during the glorious revolution.
 
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