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Stock trade app Robinhood raising at $5B+, up 4X in a year

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Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#201

Post by fullshark »

godzillabrennus wrote: post #189
fizzledbits wrote: post #172

Robinhood gets their revenue from margin interest lending to people who can't afford to invest but do it anyways. And also from selling the trading data to high frequency traders to front-run the Robinhood traders. The top guys at Robinhood all have HFT background and connections. Their pr message is priceless but a sham. The users are the real product, with all that we know goes with that.

Sounds like they engineered a fantastic business model. Am I wrong? Is there downside for the typical consumer in all of this?

Downside is greedy and ignorant investors adding debt and going bankrupt based on unforeseen market movements.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#202

Post by mrlala »

fizzledbits wrote: post #172

Robinhood gets their revenue from margin interest lending to people who can't afford to invest but do it anyways. And also from selling the trading data to high frequency traders to front-run the Robinhood traders. The top guys at Robinhood all have HFT background and connections. Their pr message is priceless but a sham. The users are the real product, with all that we know goes with that.

>And also from selling the trading data to high frequency traders to front-run the Robinhood traders.

Where's your source on this because that is blatantly illegal- so I don't believe you.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#203

Post by mrlala »

swyx wrote: post #32

what a fantastically run company. a lot of cynics here but it takes a lot of fortitude and talent to run a startup with this level of mission critical reliability (else they get crushed by users and regulators). I’ve been on record before doubting they could move into crypto so fast, and while the rollout has been slow they have certainly moved far faster than I thought possible. Yes, commission free trading is a com…

>and probably bad for you. But they have a $5bn company and I don’t. That is far more value creation than simple armchair criticism.

Not necessarily. It's not value creation when you are creating a bubble and letting people do things they probably shouldn't be doing.

Did it end up to be "value creation" when banks were allowing people to buy houses with 0% down and variable interest rates?

Because from what I hear other people saying about Robinhood, they are making money from interest on margin trading. Meaning they are encouraging their users to be trading on margin and then act like "trading is free, see no commissions!". Yeah that's great until you have millions of people invested long on margin and then the market tanks and they end up losing more than they even had.

So yeah, not too sure about the value creation here...

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#204

Post by infinite8s »

tysonzni wrote: post #197
infinite8s wrote: post #196

Earlier quoted context omitted.

That's not abuse, that's a valuable price discovery mechanism. If the whole market was passive there would be no way to determine the true price of an asset.

The universe of passive funds or ETFs includes those that track specific industry/sector, size, region and other factors. Even if the whole market is passive, traders could still vote on the valuation of an asset by buying/selling those funds. If everyone is passive, price discovery would be harder but not impossible. But there will always be traders who think they can gain an edge by going active, right?

That edge is what drives price discovery.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#205

Post by toss892625 »

selectodude wrote: post #174
toss892625 wrote: post #46

Earlier quoted context omitted.

Reducing the free loan you provide to a bank with a checking account is good, but be very careful with leverage. IMO any leverage should be a very deliberate decision. If you buy a 30k car/tuition one day (depending on how much you have invested, this could be a lot of leverage!), and the market crashes by 50% the next day, would you be ruined? It's possible that even if the stock immediately recovers from some flash…

If the market crashed by 50 percent in a day, I think defaulting on a car loan would be the least of his/your/our worries.

The problem is that there is no car loan in this case; he's paying for the car in cash, and borrowing in the investment account instead.

In both scenarios, let's say we have 60k in stocks to start.

Starting point: 60k stocks

Scenario A: 1 car, (30k car loan), 60k stocks

Scenario B: 1 car, 60k stocks, (30k debt in margin account)

Let's say the market drops by 50%, then recovers by 100% overnight.

At midnight:

Scenario A: 1 car, (30k car loan), 30k stocks

Scenario B: 1 car, 30k stocks, (30k debt in margin account)

Position is closed, so now Scenario B is: 1 car

In the morning, the world goes back to normal:

Scenario A: 1 car, (30k car loan), 60k stocks

Scenario B: 1 car

While we had the same amount of debt in both cases, in scenario A, there's no instant way for the car loan provider to instantly declare that you don't have liquidity at midnight.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#206

Post by antouank »

ghostwriter wrote: post #147
poooogles wrote: post #138

Any UK alternatives to this? Been looking at moving away from Barclays which charge you fees out the wazoo.

- https://www.trading212.com - https://freetrade.io

Do you pay fees every day, like IG? Just want to go long on some ETFs, not sure what the difference is with IG and trading212.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#207

Post by logicallee »

zanny wrote: post #85
logicallee wrote: post #70

Earlier quoted context omitted.

Index funds aren't just boring, there is something morally abhorrent about simply investing in everything that has done well enough to be in an index fund. At that rate, why not invest in government bonds, given that the government gets whatever share it wants of literally every penny that goes through commerce in any capacity? If you want security, why invest in anything other than the government? I admire people fo…

> If you want security, why invest in anything other than the government? Because you make more money in index funds with comparable security? Bonds used to be the principal way to save and invest in the past when interest rates were much higher. Its honestly a bit of a shame that as a society loaning money to the government is such a poor investment - it more reflects on the failings of the state if there is literal…

I'm sorry it took so many days (11 - this is now on the third page of your userpage so you might not see this) to reply to this: you write extremely counterintuitive and challenging things. (While also supporting your statements with uncontroversial observations that are easy to agree with.)

Thanks for taking the time to reply! I'll reflect on what you've written.

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