351–360 of 394 posts
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"Three things ruin people: drugs, liquor, and leverage - Charlie Munger" - ???
Leverage is the ability to use credit or partial collateral (i.e., non-secured or non-fully-secured assets) to purchase other assets.
I agree with the quote.
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As someone who has looked into but not actively used Robinhood - the main benefit of the Gold subscription is for day traders. With a free account, if I decide I want to sell AAPL and buy GOOG, I have to wait 3+ days before I get the money from selling AAPL credited to my account. With Gold, they basically let you float, so you can immediately get into a new position after getting out of the previous one, without hav…
If you're actually day trading you will still end up under SEC pattern day trading rules which require > $25k in the account. At that point, just get a real account with real tools. http://www.finra.org/investors/day-trading-margin-requiremen...
Enticing millenials to "trade" individual stocks is quite possibly the most anti- Robinhood thing I can think of. The only thing more ironic would be to encourage them to take on margin...which as it turns out is literally Robinhood's business model. 99% of users on the platform will ulimately end up participating in a direct transfer of their own wealth to a more sophisticated trader or algo (i.e. The banks and hedg…
Trading is how brokers make money. It shouldn't surprise you that this is Robinhood's business model. I totally agree with your investment strategy, and you can do that on Robinhood, by the way.
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This is a good time to trot out that old tech company adage: if you aren't paying for the product, you are the product. How does Robinhood make money? By selling order flow to market makers. Why do market makers want Robinhood's order flow? Because Robinhood's customers are, collectively, unsophisticated investor with no particular knowledge about the future performance of a stock making them the perfect customers fo…
And why is that a bad thing? If I make a couple of $100 trades in a day and make $10, what do I care if the pros used me for liquidity? I believe the same would happen even if I was paying $7 at Fidelity to make the trades. Not trying to be argumentative, just want to make sure I understand the conversation here.
Wow. Am I the only one here that remembers that feeling of 1999, when all stocks were going up, and one could do no wrong with leverage and a Quick and Reilly account? Good idea for Robinhood to target millennials, who definitely aren't old enough to remember.
Yup. Exactly this. Some measures suggest the current bubble is even bigger than the one in 1999. Or at least more broadly carried, in the sense that in 1999 the bubble was limited to a fairly narrow range of tech stocks. This time it's all over the place. It's not limited to a few stocks. It's not even limited to the broader stock market or to subprime credit. Today even government bonds are in a very special place.…
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And why is that a bad thing? If I make a couple of $100 trades in a day and make $10, what do I care if the pros used me for liquidity? I believe the same would happen even if I was paying $7 at Fidelity to make the trades. Not trying to be argumentative, just want to make sure I understand the conversation here.
In short it means the pros aka The Market Makers control the market. What that means is they have the ability to see all of the price action which allows them to manipulate the market. When prices go up or down, it's them deciding whether they go up or down or at least throttling the rate to maximizes their earnings. They are both buying and selling at all times. What makes Robinhood such a joke is that they are a mi…
But my go-to resource on understanding market making at least a little bit is this Matt Levine column: https://www.bloomberg.com/view/articles/2015-10-08/why-do-hi...
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But even if you pay the $9-$15 for their Gold account, you still can only get on margin the amount of capital you have in the account max ie: if you deposit $5 and have $5 of cash on hand in your robinhood, but own ~$1200 of stocks, you can use https://support.robinhood.com/hc/en-us/articles/213262686-Ro... Note that I am a robinhood user and do not use gold or any margin investing. I use it for speculation for long…
Investing or trading on margin is intended to allow you to trade while you are waiting for previous trades to settle. It's not meant to be a loan, but it is exploited that way by both banks and traders at their own risk. It's simple enough to fix, only allow margin to cover the amount of money waiting to be settled. In other words if a trade hasn't settled then the funds are not available for trading.
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Depends what you want to do, I'm about 98% in plain old, boring index-tracking ETFs. But sometimes I want to take a bit of money to make some stupid bet. Yes, to gamble. And for that purpose, often having the leverage is a good thing. The way I see it, the bets are much more entertaining than those at casinos and with better odds. Maybe it's just me, but I find casinos incredibly boring, but gambling on the market ca…
What are returns like on "boring index-tracking ETFs"?
Depending on the index you track, it can fall 80%. Consider the Asia ETFs in 2008, brutal.
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What's the long play then? Surely Robin Hood isn't absorbing the the transaction fees as a loss leader just to increase it's user base? If that's the play, any other company can emulate that.. The incentive seems to be this may cause a price war with existing brokerages.
There aren't actually any transactions fees to absorb. Wholesale brokers (think Citadel) pay retail brokers (think Robin Hood) for the privilege of executing their orders.