Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[ReynardMuldrake]

You guys, the price has not crashed yet. There is massive pressure pushing in both directions right now. As long as the outstanding shorts exceed 100% of float a squeeze remains likely. This is going to stay super volatile for the next week or so.

[Discuss Thrower]

No it's pretty clear from mainstream news coverage that this isn't Robinhood looking out for their users' interest. They're covering for the hedge funds who are getting BTFO by a bunch of barbarians instead of their Ivy-league educated, big moneyed competitors.

[ReynardMuldrake]

Originally Posted by Fat Elvis

The issue with Gamestop and what WSB was trying take advantage of was that the amount of stock shorted exceeded the actual amount of stock in circulation. Technically, that should never happen; theoretically, short positions can never exceed 100% of the outstanding shares because you are borrowing existing shares. Hedge funds, however, held a short position in Gamestop that represented 140% of the shares.

That's exactly what happened. Now WSB is trying to pinch the hedge funds for shorting shares they didn't have. The SEC should have had better safeguards in place to prevent shorts from ever getting more than 100%.

[MagicHef]

Originally Posted by FD

This is just completely insane. Robinhood is trying to stop its users from buying into an obvious crash and losing everything. Is it overly paternalistic? Yes. But it is definitely in the interests of the retail traders on the app.

You can't actually believe this.

[Shag]

Originally Posted by FD

This is just completely insane. Robinhood is trying to stop its users from buying into an obvious crash and losing everything. Is it overly paternalistic? Yes. But it is definitely in the interests of the retail traders on the app.

The **** it is. This whole thing basically bankrupted Melvin (hedge fund), and Citadel helped bail them out. The guy who founded Citadel owns a huge stake in Robinhood, so he made a call. This is protecting the hedge funds, and has nothing to do with protecting its users. I hope RH gets buried over this.

[Rain Man]

To me, this is an interesting comparison of "market mentality" versus "pump and dump". It's illegal to pump an dump, so what were the motivations and actions of the people who started this?

Of course, we all know that the game is rigged anyway. I bet 0.00000001 percent of insider trading is investigated, and then you've got things like that one big player rigging the software to execute their trades a microsecond before retail trades so they can take the difference.

Sometimes I worry a bit that the entire stock market is an unintentional ponzi scheme and at some point someone will do some math and the whole thing will collapse. For example, I give some money to google via stock that they use to fund growth. The promise that I get in return is that they'll grow and I'll then be able to sell the stock to the next people, who themselves buy it on the promise that google will grow. It seems kind of pyramid-like. With dividend stocks I like the equation better, because I'm getting a return on my money, but with non-dividend stocks I sometimes feel like I'm buying air.

[Dunerdr]

So should i remove all investments from robinhood with a class action suit being filed?

[MagicHef]

Originally Posted by Rain Man

To me, this is an interesting comparison of "market mentality" versus "pump and dump". It's illegal to pump an dump, so what were the motivations and actions of the people who started this?

The motivations were pretty simple. By over-shorting GME, hedge funds essentially forced themselves into a captive market. Someone noticed and decided to try to take advantage to make money.

[ReynardMuldrake]

The people calling it a pump and dump are way off base. This is not a pump and dump. WSB are buying and holding trying to cause a short squeeze. Look at what happened to VW in 2008. The squeeze has not happened yet. If that happens it will be like something out of a movie. Ever see Trading Places?

[DaFace]

Originally Posted by Rain Man

To me, this is an interesting comparison of "market mentality" versus "pump and dump". It's illegal to pump an dump, so what were the motivations and actions of the people who started this?

Of course, we all know that the game is rigged anyway. I bet 0.00000001 percent of insider trading is investigated, and then you've got things like that one big player rigging the software to execute their trades a microsecond before retail trades so they can take the difference.

Sometimes I worry a bit that the entire stock market is an unintentional ponzi scheme and at some point someone will do some math and the whole thing will collapse. For example, I give some money to google via stock that they use to fund growth. The promise that I get in return is that they'll grow and I'll then be able to sell the stock to the next people, who themselves buy it on the promise that google will grow. It seems kind of pyramid-like. With dividend stocks I like the equation better, because I'm getting a return on my money, but with non-dividend stocks I sometimes feel like I'm buying air.

This past year has certainly been an interesting case study in how stock price and financial performance are loosely linked at best.

[MagicHef]

Originally Posted by Dunerdr

So should i remove all investments from robinhood with a class action suit being filed?

After reading more about how Robinhood actually makes its money, I am removing my investments and moving to a real brokerage.

[KCUnited]

How does one move out of RH to another platform?

[MagicHef]

Originally Posted by DaFace

This past year has certainly been an interesting case study in how stock price and financial performance are loosely linked at best.

The value in GME is not in the financial performance of the company, but in the volume of shorts.

[Rain Man]

Originally Posted by DaFace

This past year has certainly been an interesting case study in how stock price and financial performance are loosely linked at best.

Yeah, the market was up last year, notably up, while the economy tanked. I know that the market prices in future performance, but future performance is needed just to get back to where we were two years ago. So why is the market 15 percent higher than that? It's not bargain shopping because it's at a premium. I follow the tried and true mantra of not trying to time the market, but I really can't figure out how we're going to have an overperforming market for the next two years if there's any connection at all to the real world.

And that's not even considering my big picture question of how the market outperforms inflation over time. It leads to bigger and bigger discrepancies between the stock market and the rest of the world.

It's kind of the only game in town so I keep playing it, but I try not to think about what the foundation is under this big house of cards.

[eDave]

Originally Posted by MagicHef

After reading more about how Robinhood actually makes its money, I am removing my investments and moving to a real brokerage.

This actually worked out for me real well. My orders placed last night and to fund at opening were all cancelled by RH and cleared it out. I transferred to Fidelity and bought the dip.