‘Anger’: WallStreetBets, GameStop, Robinhood Drama Becomes National Scandal

23 thoughts on “‘Anger’: WallStreetBets, GameStop, Robinhood Drama Becomes National Scandal”

1. To say that RH handled the situation poorly is an understatement. They deserve to be sued (though not locked up). I mean a 48-hour heads up would’ve given evryone time to adjust their positions in a way that was fair an equitable; instead, RH did the opposite.

   1. Interesting point, fair, but I think panic might be understandable when GME shot to $600. After all, RH will/would also be blamed when most of these retail guys lose their shirts.

   2. Robinhood was actually SELLING people’s GameStop shares today, without their knowledge or approval – at the absolute low (like $115) – “for their client’s benefit, to mitigate their risk.” They’re going to get their asses sued off. Maybe they should change their name to “Nottingham.”

2. Yeah. I doubt politicos and even Bloomberg journalists are that distraught at HF billionaires getting screwed. But this thing started to affect the wider market, via the long unwinding chronicled by our host. I mean, the portfolio I oversee is very concentrated in tech stocks (and, yes, 2020 was very good to us but we’ve been following this strategy since 2016) and I have stocks moving 5% in a day (up and down, for a mixed results). Look at ABNB or OKTA or CRWD or API… Those moves feel… jittery, unusual.

   And that’s before we even get to the vol. pros having to unwind.

   In short, reddit small investors discovered that, if they all put their weight to one side of the plane, they can tank it.

   IMHO, this shows this plane either ain’t designed well enough or sufficiently regulated (and, yeah, I groan at the idea of yet more compliance surrounding stock trading).

   But no one should be allowed to manipulate the market for profit. Not even a crowd of justifiably angry guys, loosely coordinated on reddit…

   1. this shows the plane either ain’t designed well enough or sufficiently regulated

      Or maybe people are too levered and/or taking on too much risk. Both were true in 2006-08, and instead of paying the piper, most of those who get caught with their pants down were allowed to skate. Not exactly what Schumpeter had in mind.

      1. Point well taken. You won’t find me defending bankers etc. from that debacle.

         Basically, all I am arguing is that, just as the Fed didn’t really have a choice in intervening and trying to support the system when the fiscal authorities (and judicial ones) went AWOL in 08 09, authorities/RH isn’t exactly wrong in intervening now.

         But that’s treating the symptoms, not addressing the root causes, no arguments from me on that front.

3. Bring back trading commissions!

   1. Only if they are related to the quantity bought or sold, otherwise you are being discriminatory – big guys, little guys.

      1. Were they ever not related to the size of the order?

         But high commissions discourage trading. Which means people have to look at investing at least as much as trading. And, of course, killing HFT would be a Good Thing (TM).

         I prefer market makers with strong balance sheets to dark pools of jittery money for my liquidity provision…

         1. +1

      2. I don’t remember who (Sanders, Warren?) have discussed a tax on gross proceeds, something like 0.1% or may be even 0.5%. This would be fair to all sorts of guys.

         1. A Tobin Tax. And that was a revival of a Keynesian idea. It’s been mentioned often in some circles but never implemented correctly enough.

4. In a world without justice, vigilante justice is taking form. We’re well into self-destructive territory and the milieu is only going to become more revolutionary with all the improper reactions by the corporations and institutions. Institutions do not understand the psychology of riots. James Baldwin brilliantly articulated the psychology of the Detroit riots along the lines of ‘if we’re not allowed to have any, than neither shall they’ as people became so desperate and oppressed that they were willing to burn down their own neighborhoods. America better wake up fast.

5. I wholeheartedly agree with AOC.

6. A few things are clear- and not just from this incident but from others. Robinhood is not a well run or respectable firm. There was soft collusion on trading on a lot of these names on chat boards. A moratorium on trading on some of these names was probably a proper approach- as long as notice was given – one trading day would have been sufficient. Alternatively the SEC should be pondering a circuit breaker set up for individual stocks along the lines they do for the overall market. A 15% move triggers a 1 hour pause, 30% triggers a 2 hour pause, 50% shuts down trading in a name for the day as examples. I believe the complaints from retail traders have some merit about the trading halt, had notice been given then there would have been no reasonable argument versus limitations- and it should have been more widely applied. I agree that the primary problem with this type of trading is the colluding aspect- never good when anybody or any group does it- chatboards bros, hedge funds, street or anybody. And it has shown it can artificially destabilize financial markets. As for AOC, she is getting a little bit big for her britches. She is bright, educated, personable and is a very intuitive politician. But she has a tendency to make specious decisions sometimes- Amazon for Queens comes to mind- that was a incredibly dumb decision. She is also getting way too much media coverage- fact is she is a 2nd term back bencher- a bright future possible but really green in terms of policy making or governing chops. She will probably get much more heft as she matures and gets more responsibility. However, she is starting to look like someone appealing to grievances that maybe are not always so legitimate sometimes.

   1. Do a politician eyeballs or everything. Content is all together unimportant. Trump understood this seems AOC has got it pretty well under control

      1. Trump had it under control until the mob he encouraged stormed the Capitol. So content doesn’t matter until reality comes along and teaches you a lesson…

   2. What you call her ‘incredibly dumb decision’ on Amazon was in reality opposition to a backroom, handshake deal to subsidize one of the four largest companies in the world with $3B of NY taxpayer money, which would have also displaced communities of thousands of people who stood ‘in the way of’ development in her district, and had no accompanying plans for job training or displacement that I am aware of. She is not your representative — she is theirs, and she stood up for them. Amazon could have offered a better deal, or at least ‘engaged’ with the community it attempted to invade. But it preferred the beauty pageant contest of who could stroke Bezos’ ego the best. She opposed it to protect her “current” constituents, the people who put her in office, people very much like herself. By the way, they overwhelmingly voted to give her another term recently. Isn’t this how representative democracy is supposed to work? And by the way, New York needs that $3B right about now, doesn’t it?

      1. Great comment.

      2. Well said.

7. PSA: A few people have attempted to post long, extended block quotes from Reddit in their comments here.

   Please don’t do that. Thanks in advance everybody.

8. Again I have to ask: what is the purpose of stock markets? In a capitalist democracy, it is valid to regulate markets to ensure that they run smoothly and fairly, and to align them with the interests of the society–to foster investments in infrastructure, for example. Day trading and other excesses are not necessary, and to the extent that these activities are destabilizing, they should simply be banned. I would let Elizabeth Warren choose the head of the SEC and whatever other agencies are relevant, and then let them have free reign. We’d all be better off for it.

9. RH- is it ever a good idea to give your money to a company whose CEO is named Vlad? Just askin’.