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Robinhood launches 3% checking account

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Re: Robinhood launches 3% checking account

#351

Post by eeeeeeeeeeeee »

snowwrestler wrote: post #95
AustinGrandt wrote: post #45

Earlier quoted context omitted.

It looks like both FDIC and SIPC have a 250K protection, are there any other differences between the two that would matter to an average consumer?

Maybe: > SIPC insurance provides protection for your cash balance and securities holdings if Robinhood fails financially, but does not cover investment losses due to declines in the value of securities themselves . Emphasis mine. If you put $250,000 into an FDIC-protected checking account, that account holds cash and FDIC protects the full amount of that cash. If you put $250,000 in an SIPC-protected brokerage accoun…

I don’t think that’s accurate. It’s primarily to make it clear to people that securities can lose 100% of their value. There is no guarantee.

But cash in a checking account is not going to suddenly start showing negative returns.

The only example I can think of what you’re referring to is the new Betterment checking account which is basically like a security masquerading as a riskier savings account.

Re: Robinhood launches 3% checking account

#352

Post by tptacek »

jcoffland wrote: post #259
abuckenheimer wrote: post #250

Earlier quoted context omitted.

Yes HFT buys trade flow from robin hood because they make more money executing against it but that's not actually to the detriment of the people on the robin hood app. The main way HFT firms make money is by making a market, they offer to buy and sell stocks cheaper than anyone else and get paid by people crossing the spread and sometimes exchange fees. The reason robinhood trade flow is valuable to HFT firms Isn't b…

The stock market is a zero sum game. If HFTs are making money then someone else's is losing it. The other traders who's trades are closest are the most likely losers. HFTs will tell you what a great liquidity service they provide but they are doing nothing more than using the equivalent of insider information to skim the cream off the top.

This is a facile analysis. If you believe HFT internalizers are taking money from retail traders, try to outline the series of orders that results in money from the retail trader's pocket going into the HFT's pocket, and precisely how the retail trader could have made that same money on their own.

The reality is that market makers price non-retail flow more conservatively (ie: costing traders more) because they have to anticipate informed large block trades wiping them out. Since they don't have to do that for retail flow, their cost basis for those trades is lower, and they can (and do) split the proceeds of that reduced cost with brokerages.

It's overwhelmingly likely that any other brokerage you use does the same thing, and simply doesn't tell you or pass any of those savings on to you.

Re: Robinhood launches 3% checking account

#353

Post by longerthoughts »

mturmon wrote: post #209
biomene wrote: post #164

Earlier quoted context omitted.

The financial crisis was not a result of bad mathematics. Investments are made because they promise to return dividends. But there is always a chance that they might return lower than expected dividends, or none at all. This can be because the market didn't grow as expected, wages rose above expectations, a tsunami wiped out your factory or an array of other factors completely beyond your control. The best mathematic…

Not so! One can indeed defend the claim that poor mathematical modeling of the statistical properties of collateralized debt obligations (CDOs) was the underlying cause of the bottom falling out of that market. In brief, models were constructed of the complex behaviors of packages of loans - CDOs. These models, trained under benign market conditions, did not account adequately for correlations that might make all the…

Your point directly contradicts the conclusions of the paper you linked.

The paper concludes that while there were deficiencies with the modelling method (as there are with any model), input manipulation was at greater fault than inherent failures of the model itself.

"These results support the arguments of Donnelly & Embrechts[4] and Mackenzie & Spears[12], that Li and the Gaussian copula were not to blame for the Crisis...Instead it appears that the gaming of the model beyond its original assumptions, the outsourcing of CDO risk management to credit rating agencies, and the failure to perform holistic risk assessment seem far more to blame."

"The simulation results in this paper show that it is more important to focus on parameter estimation than copula choice. This leads to the observation that when it comes to mathematical financial modelling: in order to avoid a disaster, the cooking is more important than the recipe."

Re: Robinhood launches 3% checking account

#354

Post by bovine3dom »

kyleomalley wrote: post #321
snowwrestler wrote: post #272

Earlier quoted context omitted.

The stock market is not a zero sum game. I don't know where people get this idea that because every transaction involves two sides, the sum is therefore zero. Every transaction in the "real economy" also has two sides, and we all know that grows. The stock market grows too. There are even indexes to track how well it is growing.

The “real economy” runs on a fiat (inflating) currency system that is effectively not zero sum. The stock market is a closed system that currencies feed into - at the end of the day it’s still a measure of a fixed amount of value and thus zero sum.

But there's stocks on the other side that represent real things that increase in value. E.g, compare Google 20 years ago with Google today and see if you think it's more valuable.

Re: Robinhood launches 3% checking account

#355

Post by josteink »

People still have checking accounts? In 2018? And that’s a completely serious question.

I literally haven’t seen a check used anywhere the last 25 years. I doubt any place I frequent would accept one.

In fact I don’t know a single bank which issues checks...

I assume most university students these days wouldn’t even know what a check was, if given one.

So where is the market? The past? I mean... you’d need a time machine to use these, right?

Re: Robinhood launches 3% checking account

#356

Post by superfrank »

count wrote: post #318
superfrank wrote: post #301

Earlier quoted context omitted.

Robinhood definitely had down time yesterday, but I'd like to make a note that /r/Robinhood overreacts to things like crazy. I'm pretty sure 95% of the people in there are under 20 and daytrading options with less than $5000. I'm bringing this up because, while some people did lose money yesterday because of Robinhood's downtime, there we also a lot of people claiming to have lost money, but were blatantly lying. I'm…

That's /r/wallstreetbets :)

They both do. The only difference is that WSB accepts losing money while /r/robinhood loses money and then claims it's Robinhood stole their money.

Re: Robinhood launches 3% checking account

#357

Post by jkqwzsoo »

kyleomalley wrote: post #321
snowwrestler wrote: post #272

Earlier quoted context omitted.

The stock market is not a zero sum game. I don't know where people get this idea that because every transaction involves two sides, the sum is therefore zero. Every transaction in the "real economy" also has two sides, and we all know that grows. The stock market grows too. There are even indexes to track how well it is growing.

The “real economy” runs on a fiat (inflating) currency system that is effectively not zero sum. The stock market is a closed system that currencies feed into - at the end of the day it’s still a measure of a fixed amount of value and thus zero sum.

No, companies create excess value and grow. Tesla pre Model 3 is a very different company than Tesla post Model 3. A drug company is very different if they've patented a new wonder drug. New companies come into existence and offer shares via an IPO.

Investing in the stock market is literally investing in the collective appreciation of the value of the companies that make up it.

Re: Robinhood launches 3% checking account

#358

Post by rchaud »

deminature wrote: post #252
fullshark wrote: post #232

Earlier quoted context omitted.

Agreed, they are trying to buy customers, if it turns out that they can't convert these customers into traders they will lower the rate to a breakeven amount and not care if they lose those accounts.

Perhaps true, there's been an opening for a 'cool' millennial-oriented financial institution for a while now, so perhaps fewer customers will drop off than expected.

Seems like a weak market to go after, given that people likely to respond to a "cool" financial services brand may be a poorer demographic that maybe doesn't have any prior experience with "legacy" financial services providers. So just because they create accounts @3% doesn't mean they'll also open trading accounts.

Re: Robinhood launches 3% checking account

#359

Post by superfrank »

mgr86 wrote: post #331
superfrank wrote: post #301

Earlier quoted context omitted.

Robinhood definitely had down time yesterday, but I'd like to make a note that /r/Robinhood overreacts to things like crazy. I'm pretty sure 95% of the people in there are under 20 and daytrading options with less than $5000. I'm bringing this up because, while some people did lose money yesterday because of Robinhood's downtime, there we also a lot of people claiming to have lost money, but were blatantly lying. I'm…

Wouldn't you need 25k in your account to day trade options without being caught up as a RH pattern day trader?

You are correct, I was exaggerating a bit.

I feel like most of that sub isn't technically day trading, but it feels like the average time holding a security is less than a week.

Re: Robinhood launches 3% checking account

#360

Post by itsnickk »

josteink wrote: post #355

People still have checking accounts? In 2018? And that’s a completely serious question. I literally haven’t seen a check used anywhere the last 25 years. I doubt any place I frequent would accept one. In fact I don’t know a single bank which issues checks... I assume most university students these days wouldn’t even know what a check was, if given one. So where is the market? The past? I mean... you’d need a time mac…

Mine is essentially my main account I use for anything money-related. It doesn't mean I use checks.
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