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An Update on Market Volatility

blog.robinhood.com

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Re: An Update on Market Volatility

#101

Post by Miner49er »

Cd00d wrote: post #80

I'm honestly confused. I'm seeing a lot of rage in these threads. More than I'd expect. I understand not liking the hedge funds, and wanting to "stick it to the man" in some way, but it seems like more is going on here. Nobody is buying GME long at $400. The price is crazy. GameStop's business is selling used hard copies and leaning into customer dissatisfaction. It's a clear bubble and people are going to be hurt wh…

It's a short squeeze, not just a bubble?

I bought a single share near $400 for the memes, so I wouldn't say "nobody".

Some retail investors will likely lose, sure, but the biggest losers will be the shorts, and retail/longs will win as a whole. That's why people are mad, with Robinhood's manipulation they are setting it up so only the shorts win and almost no remaining retail.

Re: An Update on Market Volatility

#102

Post by systemvoltage »

EpicEng wrote: post #31
systemvoltage wrote: post #12

Earlier quoted context omitted.

Mark my words - Robinhood is going to be fine and it will have negligible impact. They have a strong product and better than anyone else in the market as a mobile app.

>They have a strong product and better than anyone else in the market as a mobile app. reply Guess you've never heard of ThinkOrSwim. RH is a toy. It's fine for most purposes, but not much more than fine. They consistently fill orders at a sub-optimal price and the amount of downtime is a joke. This hurts them and I think you're wrong about their future. They're helping to screw over the very people who have made the…

I have. ThinkOrSwim (TDA) is amazing. But they’re operating in a different segment. Newbies would be overwhelmed in using TOS.

Re: An Update on Market Volatility

#103

Post by ballenf »

Cd00d wrote: post #80

I'm honestly confused. I'm seeing a lot of rage in these threads. More than I'd expect. I understand not liking the hedge funds, and wanting to "stick it to the man" in some way, but it seems like more is going on here. Nobody is buying GME long at $400. The price is crazy. GameStop's business is selling used hard copies and leaning into customer dissatisfaction. It's a clear bubble and people are going to be hurt wh…

People did the same thing with Beanie Babies and lost entire life savings.

People get into credit card debt and eventual bankruptcy buying any number of luxury items. Should we require credit reports before you can buy Gucci or expensive wine?

People lose their houses in Las Vegas.

If we want to protect people, then I don't think it's fair to single out the stock market as the only place we do that.

Re: An Update on Market Volatility

#104

Post by dcolkitt »

gmaster1440 wrote: post #96
dcolkitt wrote: post #90

Earlier quoted context omitted.

Can anyone in this social movement articulate what exactly those “shenanigans” are and provide evidence that they’re occurring. Not that there aren’t well founded criticisms of the financial industry. But as far as I see WSB appears to have zero overlap with any of them. All I see are gross inaccuracies (“short interest over 100% means they were naked short”) and zero-evidence QAnon like conspiracy theories about hed…

Hedgefunds overstepped and now if you own a share of GME they are required to buy it back from you at any price. They made that contract when they shorted. They planned nobody would notice or care. Now every person who notices and does the most rudimentary hello world market action (buying a stock) hurts them. This could only happen in the context of the audacious 140% shorts. This is the type of shenanigan people ar…

A high short interest is not a sign of any sort of malfeasance. There’s no upper limit of shorting, since shares can be borrowed, sold, then borrowed again.

Short interest above 100% is perfectly fine. Stocks can and do go over this imaginary line, without any fraud involved. It just means that many people disagree about the price.

Allowing speculators to build up large short positions is a good thing, because it helps prevents overpriced bubble from forming. Read the actual academic research from my original look comment. If a hedge fund is willing to take the risky and thankless job of taking a large and concentrated short position, the public should be thanking them for their contribution to market efficiency.

Re: An Update on Market Volatility

#105

Post by 2bitencryption »

cactus2093 wrote: post #92
2bitencryption wrote: post #33

Earlier quoted context omitted.

I can't help but facepalm that people are genuinely encouraging one another to buy a stock that is so obviously overvalued, and then hold it at that price as long as possible... there are not many guarantees in trading, but that is a guarantee to lose money. and because it's under the guise of "sticking it to the man" people have become even less rational about their money. so when the stock eventually corrects to wh…

> there are not many guarantees in trading, but that is a guarantee to lose money. What? This is not at all a guarantee. Even if there were a guarantee that it will come back down eventually (which seems highly likely but that's still not a guarantee), that doesn't mean it will go down today or tomorrow or next week. For all we know there is still lots of time for new investors to get in, make money, and then get out…

the "guarantee" I'm referring to comes from these two assumptions:

- the price is overvalued and will correct

- the prevailing sentiment on the wsb subreddit is "HOLD NO MATTER HOW HIGH IT GOES" (seriously, that's what they are saying)

So, sure, maybe gamestop will magically become a company as valuable as its stock implies it is. But realistically no one would bet on this.

So given that it is overvalued by everyone's definition of the term, and given that the hivemind has decided to "HOLD NO MATTER WHAT", it becomes obvious what will eventually happen - the hivemind will keep holding, since that's the meme, and memes drive stocks now - and Gamestop will correct. And that will be that.

Re: An Update on Market Volatility

#106

Post by gmaster1440 »

dcolkitt wrote: post #104
gmaster1440 wrote: post #96

Earlier quoted context omitted.

Hedgefunds overstepped and now if you own a share of GME they are required to buy it back from you at any price. They made that contract when they shorted. They planned nobody would notice or care. Now every person who notices and does the most rudimentary hello world market action (buying a stock) hurts them. This could only happen in the context of the audacious 140% shorts. This is the type of shenanigan people ar…

A high short interest is not a sign of any sort of malfeasance. There’s no upper limit of shorting, since shares can be borrowed, sold, then borrowed again. Short interest above 100% is perfectly fine. Stocks can and do go over this imaginary line, without any fraud involved. It just means that many people disagree about the price. Allowing speculators to build up large short positions is a good thing, because it hel…

There is nothing inherently wrong in short interest above 100%, as you point out. There is no disagreement from me that it's possible to both have large short interest and at the same time have healthy economic activity devoid of fraud.

The core of the social movement here is an asymmetry in who gets to engage in audacious economic transactions. Is it reserved exclusively for the institutions we should be thanking for maintaining the pillars of our society? Maybe if a fund decides to take out an audacious short position, retail investors should be able to have an equal and opposite reaction to it.

The suppression from trading platforms and the asymmetric response here is only supporting the cause of the movement, and not helping with getting us closer to "thanking" the funds.

Re: An Update on Market Volatility

#108

Post by TigeriusKirk »

systemvoltage wrote: post #100
nightski wrote: post #24

Earlier quoted context omitted.

It's a pretty product but calling it "strong" is very generous. It goes down constantly and I'd personally never trust more than a few hundred bucks to the platform. It's by far one of the worst brokerages in terms of execution and reliability.

You’re right. They’ve got some issues, but there is nothing else like it out there that’s easy for newbies to invest despite of reliability issues.

But they've taken themselves out of the newbie market. Newbies now see them as shady. Potential newbies now see them as shady.

I think you're drastically underestimating the reputational hit they took today.

Re: An Update on Market Volatility

#109

Post by notahacker »

gmaster1440 wrote: post #76
dcolkitt wrote: post #46

Earlier quoted context omitted.

> The social movement is honorable I’m gonna disagree. The entire “social movement” seems to be little more than the same tired old cliches and hysterics about “speculators”. The main grievance is basically that short selling is bad. Despite academic finance, finding again and again that short selling meaningfully improves price efficiency and protects ordinary investors from bubbles and mania.[1][2] Again and again…

The part that is "honorable" about the social movement, for me at least, is that the sheer exposure of the shenanigans that wall street carries out, coupled with the challenging of status quo power structures (institutional vs. retail, special accredited status vs. joe on RH), has the potential to lead to general reform and positive changes. I think you're too quick to defend short selling as purely good, just as eve…

But the shenanigans Wall Street carries out isn't the world's best kept secret, and this adds more noise than signals to the mix. The Wall St vs the masses narrative is entirely fake (a lot of market makers and funds already long on GME are delighted at the influx of money from novices, and some of the shorts will be little guys too), the claims of shenanigans don't really add up (Robinhood suspends trading today to benefit a partner who unwound their position... yesterday) and we're certainly not seeing middle ground arguments on shorting, or funds, or anything really. And people aren't going to get more open minded after they lose money in their first significant interaction with financial markets.

I doubt reforms that might happen as a result are going to be what people piling on meme stocks want either.

Re: An Update on Market Volatility

#110

Post by esoterica »

awillen wrote: post #25

I don't understand how they can blame capital requirements and potentially having to cover customers' losses (that was Interactive Brokers) for stopping purchases of the stock. Unless you're talking about buying on margin, there's no risk that you'd have to absorb any loss for someone who just buys a share of the stock through you with their own cash.

You don't understand how trade settlement works under the hood. When trades occur, the money doesn't change hands immediately, only on the trade settlement date a couple days later. Before the trades settle the clearing house needs to be reassured that the brokerages actually have the money to settle the trades (brokerages have gone bankrupt before), so they make the brokerages post collateral. When volatility goes up the clearing houses demand more collateral to deal with the increased risk, and if Robinhood doesn't want to pay it then the clearing houses won't let them trade.

In other words, even if the end user isn't using margin, there is "margin" happening in the background between the clearing house and the brokerage.

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