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SIPC Says It Has Serious Concerns About Robinhood's New Product
71–80 of 322 posts
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#72Earlier quoted context omitted.
AirBnB and Uber are both examples of companies that were huge wins for customers/consumers. Just because they flout regulations which are often times outdated and unnecessary (re: protecting inefficient incumbents) doesn't mean they aren't doing what's good for the consumer. I agree though that Robinhood is a different story with potentially harmful consequences for unsophisticated investors looking for a safe/easy i…
The people sexually assaulted, discriminated against because of their skin color or sexuality, and those recorded in their beds without their consent would all presumably disagree that Uber and AirBnB flouting regulations made for huge wins for customers/consumers. EDIT: The fact that these crimes "have happened at hotels/in taxis as well" ignores the fact that they are far more likely in an environment where regulat…
I don't want to defend either of
- Uber/AirBnB's regulatory abitrage
- assault, harassment, or illegal discrimination
but this is a complete non-sequitur. The laws that they're avoiding have nothing to do with individuals hurting other individuals. And assault, harassment, or illegal discrimination are perfectly possible in the context of a licensed hotel or taxi.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#73Earlier quoted context omitted.
AirBnB and Uber are both examples of companies that were huge wins for customers/consumers. Just because they flout regulations which are often times outdated and unnecessary (re: protecting inefficient incumbents) doesn't mean they aren't doing what's good for the consumer. I agree though that Robinhood is a different story with potentially harmful consequences for unsophisticated investors looking for a safe/easy i…
The people sexually assaulted, discriminated against because of their skin color or sexuality, and those recorded in their beds without their consent would all presumably disagree that Uber and AirBnB flouting regulations made for huge wins for customers/consumers. EDIT: The fact that these crimes "have happened at hotels/in taxis as well" ignores the fact that they are far more likely in an environment where regulat…
I'm no fan of AirBnB, but all of those things have happened at hotels.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#74Through all of this I can't help but be reminded of the 2008 financial crisis and think "this is not going to end well." One part of that crisis was Icelandic Banks making a huge push for savings all over the UK and other parts of Europe ("IceSave") with the promise of better interest rates. When it all went belly up those savers realized these Icelandic banks were not quite the same thing as UK banks and Iceland ref…
Short term investment grade debt has a default rate of near-zero and pays more than 3%. See for yourself: https://investor.vanguard.com/etf/profile/VCSH It is entirely possible for them to safely promise a 3% account under these conditions. This is not at all like the financial crisis. It's just wrapping an investment grade bond fund in a bank account interface.
It's very unlikely that regulators and smart money would smile upon "wrapping" VCSH or similar corporate bond fund and trying to transform it thereby into a demand deposit account.
A bond fund like that, even with a relatively short duration of 2.65, is going to have significant price movement in the principal amount due to interest rate risk. (Not counting credit risk etc -- credit spreads could move significantly too in a financial crisis.)
A big rate move coupled with a big jump in credit spreads could easily move the price of the underlying by several percent in a matter of days.
Not so cool when your deposit of $100 can only be cashed out for $97 a few days later.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#75Robinhood's offering is indistinguishable from a cash management account at a brokerage. Short-term deposits, check writing, debit card, interest bearing, etc.
Fidelity Investments pioneered this product, and now it's available from others like Schwab.
But at Fidelity, the cash management account is distinct from the brokerage account. While the brokerage account is insured by the SIPC, cash management funds are swept into FDIC-insured balances at actual banks.
Looks like Robinhood is gonna lose on this one.
Source: https://www.fidelity.com/cash-management/faqs-cash-managemen...
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#76Earlier quoted context omitted.
Short term investment grade debt has a default rate of near-zero and pays more than 3%. See for yourself: https://investor.vanguard.com/etf/profile/VCSH It is entirely possible for them to safely promise a 3% account under these conditions. This is not at all like the financial crisis. It's just wrapping an investment grade bond fund in a bank account interface.
I clicked 'performance' on that page and it says 1.5% over the last five years. Am I reading it wrong?
does 'performance' include dividends?
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#77Earlier quoted context omitted.
AirBnB and Uber are both examples of companies that were huge wins for customers/consumers. Just because they flout regulations which are often times outdated and unnecessary (re: protecting inefficient incumbents) doesn't mean they aren't doing what's good for the consumer. I agree though that Robinhood is a different story with potentially harmful consequences for unsophisticated investors looking for a safe/easy i…
The people sexually assaulted, discriminated against because of their skin color or sexuality, and those recorded in their beds without their consent would all presumably disagree that Uber and AirBnB flouting regulations made for huge wins for customers/consumers. EDIT: The fact that these crimes "have happened at hotels/in taxis as well" ignores the fact that they are far more likely in an environment where regulat…
It sounds like you're conflating common law with industry regulations.
If I'm a fisherman in Florida, and I need to follow regulations for the fishing industry there, they don't have a stipulation that you can't discriminate against certain persons based on age, raced, gender, etc. when you take customers out on expeditions.
Why? Because that's covered by United States law.
Yes these things happened, and yes they are atrocious but they have nothing to do with the regulatory gray areas that these companies operated in.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#78Earlier quoted context omitted.
Short term investment grade debt has a default rate of near-zero and pays more than 3%. See for yourself: https://investor.vanguard.com/etf/profile/VCSH It is entirely possible for them to safely promise a 3% account under these conditions. This is not at all like the financial crisis. It's just wrapping an investment grade bond fund in a bank account interface.
I clicked 'performance' on that page and it says 1.5% over the last five years. Am I reading it wrong?
That's the average annual performance. Interest rates only started climbing over the last couple of years.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#79The whole "this can't end well" seems to come at every Robin Hood product announcement. The somewhat recent addition of crypto is just depressing. They've integrated it with chat and live announcements of transactions, so you see people's names as they buy $1500 or $2500 worth of crypto as the whole market makes an inverted hockey stick nosedive to zero. But the most absurd thing was seeing the HN comments yesterday…
If they make a ton of money but give users an easy 3% account I wont complain. Why is everyone so mad at them for being successful when they are offering cheaper services then the rest of the market!? Do they need to hire a homeless CEO to actually qualify as doing something good for society overall?
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#80“The statute that we administer says that we protect money with a brokerage firm that is used for the purchase of securities,” he added. “On Robinhood’s help page, it says that you don’t need to invest to use Robinhood checking and savings, that statement is wrong. If you deposit money for any other purpose, it is not protected.”
So it is insured, unless they can prove it's not for investing?