Additionally I'm beyond disgusted at how "any publicity is good publicity" turned out to be so true and Robinhood came out stronger than ever from this whole debacle: https://www.cnbc.com/2021/02/03/why-investors-were-willing-t...
> “It’s the fastest growing consumer app, and has better engagement than social media,” one investor said. “The majority of those new traders won’t be trading GameStop.”
Having "User Engagement" as a benchmark for an investing app is beyond immoral. Robinhood has always been extremely predatory at encouraging users to actively gamble with their investments, and utilizes all kinds of user manipulating tactics such as gamification that has no place in a finance app.
They will have a very successful IPO, and the top shareholders/investors will make billions, all from a product named Robinhood that excels at almost nothing but transferring wealth from the masses to the elites.
And it will be hailed as a true Silicon Valley success story.
With regards to treating investing like gambling, there's no real problem with that. There's definitely a market for it, and it's why /r/Wallstreetbets exists.
There's a big problem with that, because marketing gambling to Americans is often illegal. Do people remember the poker boom and Pokerstars getting destroyed? https://en.wikipedia.org/wiki/United_States_v._Scheinberg
Like drugs, criminalisation outright creates problems. Like tobacco, allowing people to market addictions with serious adverse effects can't be allowed to continue indefinitely. This stuff should end up like tobacco in some countries: legal to sell, but not to market it, you have to ask for it.
There are also markets (pretty large ones too) for cocaine and hookers and human trafficking.
There is a difference between treating investment like gambling and teaching and encouraging new investors how to take unnecessary risks.
In fact, if not for the blatant hypocrisy of them doing this under this mission statement “democratizing finance”, I may be ok with how predatory they are.
But I'm not a CT so who knows.
Sure you can believe in conspiracy not in "buy cost collateral/sell is free" but why here on HN? Isn't there a subreddit for that?
No, r/wallstreetbets was encouraging users to actively gamble with their investments, Robinhood was just allowing its users to make their own decisions, like any investment app for grown ups should.
They blocked purchasers from buying.
Trying to sqeeze a short is one thing, but trying to actively make them lose money overall is an entirely different beast and I'm not sure of any good example of when its happened.
One thing is certain, there are a lot of regular retail investors who are holding some heavy bags right now. :(
This is /u/Variation-Separate "market makers engineered next leg down all the way to SPX 1,800" all over again.
So many people are now holding the bag. They apparently also don't understand that in the stock market, the price is determined by the last transaction. If less people buy (and who should buy, because every gambler is already in), gravity pulls the stock down. Party is over.
And Musk should be investigated by the SEC a bit more often.
Edit: One thing to add: I refuse to believe that retail ONLY forced the price up. I'd bet some big players participated in the pushing of the price all the way up, selling at the top and now retail is holding the bag, because they thought they make up most of the volume, whereas they have been played.
Objective facts: sentiment has changed, prices have decreased, people have likely lost money.
Its frustrating to see a narrative - and not as far as I know out of the SEC themselves - talking about one particular focus of investigation while ignore other dubious areas, even if they arent technically illegal.
The media coverage is absolutely terrible, not only the silver-thing but also the silence on the SEC. It's truly disheartening
That was amazing. It took a few weeks of WSB going on GME before the media noticed, and by that time I was sick of how everything on Reddit was about that. And then one morning all news outlets talk about silver and I had seen nothing of the sort on reddit.
This makes me worried the modern reputable media is just an echo chamber, always promoting the same stories with the same views and never investigating anything.
> The correlation coefficient between $GME and $SAVA today was 0.884648, nearly unity. Video game retailer on one side, biotech on the other. There should be no correlation but for.... Both traded multiple $billions. #BigMoney building you staircases and knocking castles down.
This sentiment is repeated in his tweets, though he often deletes them.
However, I am certain that the whole story was a ploy for whales to hide behind. But again, what do I know.
[1] https://twitter.com/michaeljburry/status/1357528669271388160
The idea that Robinhood users can move markets is kinda silly. It's been told again and again for 6-9 months now. But a back of the napkin calculation shows that it's not very plausible: Even if 100 million Americans put their $1,200 stimulus check into stocks, that'd be only $120 billion, which isn't that much of the daily volume of the stock market. And most of them probably don't sell/trade on a daily basis, they rather baghold TSLA, AAPL and then a bit of GME.
The excitement generated towards a stock, the momentum they build, is almost invaluable even if just for a few days, no matter your business or the price of your stock. Money can’t buy that.
https://investorsnews.net/2021/01/27/nasdaq-ceo-suggests-hal...
I don't see GME falling below 40 anytime soon, the core group that started all of this should be holding if anything said until a week ago had any meaning or sincerity at all. Just the people who hold should suffice to keep the stock above 50. How did it drop to 40 Euros yesterday?
And whats going on over at wsb? There's astroturfing, trolls, people who bought in at 300, the core that pushed the hold-narrative - who's to be believed? The post on r/stocks about the second squeeze? Man, what a ride.
There are vast numbers of financially illiterate people pouring what little money they have into this pipe dream that a short squeeze can still be effected.
And these people are fueled by incessant bullshit that approaches, and in some cases even exceeds, the level of QAnon.
The facts of the matter are that (1) the cat was out of the bag last Wednesday and (2) since then, WSB has been playing poker with their cards face-up, calling every single raise thrown at them.
This is a hedge fund's dream come true. You have an army of saps still willing to pay you $60 for a stock that is worth $20 or so, and they simple won't stop.
To me, it doesn't seem that this is entirely coincidental with the aftermath of the storming of the Capitol; having lost one avenue for delusion-based marketing, everyone involved - mainstream and social media alike - had to find a new thing to hype.
Wonder what's next? Find out in a couple of weeks.
For whatever it's worth, https://en.wikipedia.org/wiki/GameStop_short_squeeze says it definitely happened, but at the same time it offers zero sources for its claim that "the rush to buy shares to cover those positions as the price rose caused it to rise even further".
Furthermore, has anyone actually demonstrated Melvin actually shorted the stock? It would seem like they owned a few puts. Puts don't get squeezed, they just expire out of the money.
[0] https://zerodha.com/z-connect/traders-zone/trading-psycholog...
> Now imagine if that was concentrated in the Robinhood top 100?
Well, probably not evenly distributed. Most goes to the top ten, most probably to AAPL, TSLA, FB, MSFT and other big names. I just wonder: once invested, do people actively trade all the time to cause so much volume?
But their predatory behavior have long existed before this GME debacle. Which other “investment apps for adults” show confetti animation after a trade? Or actively have UI that go “wanna make more money? Try trade on margin!”?
Of course, I'm oversimplifying stuff like risk management, margin calls etc. but generally speaking, what forces a hedge fund to liquidate its short position?
The theory was that if they have to spend $X per week, and that number is higher than what they would gain if they waited Y months, then they'll be "forced" to do it.
To understand the scenario where a short is forced to cover imagine you are the exchange. You don’t own shares. You just match orders and move money around and so on. One of the things you do, for margin players, is lend short-sellers shares that others bought on margin from the exchange. You bought it on margin to sell it and the other guy bought it margin to hold it. If the price spikes and the other guy wants to sell it what will you do?
Institutional investor A believes in GME and owns a lot of stock. They want to hold GME long-term. They don't care about price fluctuations, but they want to make a steady profit by lending out their shares. Institutional investor B believes GME is worth nothing, borrows the stock from A and sells it to whomever. The price goes up from $20 to $300. A doesn't care, the steady income from the lending fees is more valuable to them from a risk perspective and voting rights or whatever. B thinks this is a bubble and decides to sit it out. Where is the forced covering?
Edit: Can't answer to you anymore, because of tree size limit. So here:
> A has to continuedly prove that they have enough money to be able to eventually buy back the stocks to assure B that he will eventually get their stocks back. If they cannot show that, then they are forced to either raise more capital or return the stocks.
Good point. Not sure about the 'continuously' or if there can be individual short selling contracts between two parties that have different margin requirements. Maybe a call from B to A like "we will give you back your shares in a month when the bubble is over" works in the real world. Not for retail investors, but between big parties. I don't know much about this.
A has to continuedly prove that they have enough money to be able to eventually buy back the stocks to assure B that he will eventually get their stocks back. The more the price goes up the more money the have to show that they have. If they cannot show that, then they are forced to either raise more capital or return the stocks.