Robinhood

[Goalpost]

The state of Massachusetts has filed a complaint against Robinhood. Robinhood is sort of the young trader's platform in trading stocks. They have become so popular that an IPO is expected some time next year. The complaint against them seems to be that they are purposely recruiting inexperienced traders. The state references it as a 'gamesmanship' type platform that inexperienced people could fall into. if you make a successful trade then your screen rains confetti on it like a video game might do. Can anyone just have the freedom to just put their money where they want? Do they need to be safeguarded? I think Massachusetts is willing to admit there are successful traders but is concerned, sort of like gambling, there is a responsibility factor.

[fredtoast]

(12-16-2020, 01:53 PM)Goalpost Wrote:   Can anyone just have the freedom to just put their money where they want?  Do they need to be safeguarded? 

History has proven over and over and over again that experienced business men, as well as straight up con men, will take advantage of the general population if there are not some strict guidelines in place to prevent exploitation. 

[BmorePat87]

This is a tough one. I support gambling, but I see the dangers and it can ruin lives. Packaging day trading as a sort of video game can lead to similar results, but where do you draw the line?

[Au165]

It is really about accessibility. Its popularity is because they made it easy to enter the market, not because they have "game-like" mechanics. I am pretty big in online gaming and in almost every community forum, discord, etc. there is a guy always looking to recruit people using their referral link. While this sounds bad, this same concept has been around for decades with standard brokers it was just more difficult to get someone to go down to an office and fill out paperwork.

The issue is that accessibility leads to gullibility. People get told how "such and such made x dollars trading Tesla last week" then everyone thinks they can make easy money. The rise of youth day trading is a BIG issue right now and Robin Hood may be the platform many used but that's just the vehicle, not the issue. Day trading has become romanticized by 20 somethings as a way to make easy money and it is getting people absolutely crushed. There are whole discord chats and subreddits dedicated to day trading but like the old pump and dump newsletters, they recruit massive amounts of people, and the ones controlling them are making moves first then selling off as they bring others into the fold.

Investment illiteracy is the problem here, not Robinhood. The biggest drivers of these 20 somethings going broke, or in debt, by the way are options. They really are straight-up gambling, and the fact you can do naked options should be criminal.

[fredtoast]

(12-16-2020, 03:48 PM)Au165 Wrote: Investment illiteracy is the problem here, not Robinhood.

I agree 100%.

But Robinhood is still an attractive tool for exploiting the uneducated.

I see a difference between a gambling site, where responsible people spend disposable income, and a gambling site that sells itself as an investment tool, where people gamble with their life savings.

But maybe they both end up getting the same people anyway.  There have always been people who want to be "traders" instead of "investors" in the stock market.   

[*Nately120*]

How could something named after Robin Hood be so morally ambiguous and/or lead to loss of personal wealth?

[CKwi88]

"A fool and his money...."


God it's a tough one.

Robinhood certainly exploits the ignorant investor/trader and day trading has been romanticized by the internet to the point that people don't realize how close it really is to gambling. But there's nothing inherently wrong with making the market more accessible to people, it's actually a pretty good thing IMO.

What is Robinhood to do to protect people from their own stupidity? More disclaimers? Mandatory educational videos before being able to put in orders?

[Au165]

(12-16-2020, 04:18 PM)fredtoast Wrote: I agree 100%.

But Robinhood is still an attractive tool for exploiting the uneducated.

I see a difference between a gambling site, where responsible people spend disposable income, and a gambling site that sells itself as an investment tool, where people gamble with their life savings.

But maybe they both end up getting the same people anyway.  There have always been people who want to be "traders" instead of "investors" in the stock market.   

What makes Robinhood any different from any other online brokerage though? In reality, the only difference is their demographic is younger. That age difference leads to a lot more risky behavior, but the fundamentals of the platform are really no different. I have used it before and they don't offer anything that every other brokerage does (I personally just prefer their UI). As I said, its (Robinhoods) popularity for 20 somethings was simply their ease to onboard but the allure of quick cash from day trading is a phenomenon pushed by online forums, Reddit, discords not really Robinhood they just are a beneficiary of this rise in interest, not the cause of it. 

When I was in college E-Trade was all the rage and a bunch of us on campus were using referral bonuses and signing up anyone we could to day trade. I made some money, but I had a buddy who lost his ass doing a naked short. The fact that a brokerage let a 20 something year old with no income trade on margin was stupid but it's legal so they allowed it. What is going on today is no different than things I saw 10-12 years ago it's just, like everything, more noticeable because of social media.

[Goalpost]

(12-16-2020, 05:05 PM)Au165 Wrote: What makes Robinhood any different from any other online brokerage though? In reality, the only difference is their demographic is younger. That age difference leads to a lot more risky behavior, but the fundamentals of the platform are really no different. I have used it before and they don't offer anything that every other brokerage does (I personally just prefer their UI). As I said, its (Robinhoods) popularity for 20 somethings was simply their ease to onboard but the allure of quick cash from day trading is a phenomenon pushed by online forums, Reddit, discords not really Robinhood they just are a beneficiary of this rise in interest, not the cause of it. 

When I was in college E-Trade was all the rage and a bunch of us on campus were using referral bonuses and signing up anyone we could to day trade. I made some money, but I had a buddy who lost his ass doing a naked short. The fact that a brokerage let a 20 something year old with no income trade on margin was stupid but it's legal so they allowed it. What is going on today is no different than things I saw 10-12 years ago it's just, like everything, more noticeable because of social media.

The implication i get from Robinhood is that they seem capable of moving stocks.  I'll see a stock pre-opening that is trading at 4.50 that closed yesterday at 2 bucks.  And with no real news from the company it is generally agreed that the Robinhood traders are doing it.  Now I've seen stocks trade up via an upgrade, but this seems like a community is causing it.

[*michaelsean*]

Day trading is just stupid for 99% of people. Remember when everyone thought they were investing geniuses during the dotcom era?

[Au165]

(12-16-2020, 05:17 PM)Goalpost Wrote: The implication i get from Robinhood is that they seem capable of moving stocks.  I'll see a stock pre-opening that is trading at 4.50 that closed yesterday at 2 bucks.  And with no real news from the company it is generally agreed that the Robinhood traders are doing it.  Now I've seen stocks trade up via an upgrade, but this seems like a community is causing it.

Nah, Robinhood is just a platform it isn't moving anything. The pre-market and after-hours movement can't simply be assigned to Robinhood as that pre-dates Robinhood. Like for decades that is often caused by large institutional buying where someone thinks they know something OR large buying groups. What people are blaming Robinhood for is really the result of social media and the rise of online day trading groups. Robinhood may be the platform of choice that these members use but that really is only because of the ease of use of a phone app not because the platform itself provides any advantage or "gaming" mechanics.

Go check out the subreddit Wall Street Bets to see what I am talking about. It's 1.7 million people who essentially approach the stock market as gambling. They aren't alone in this, this kind of groups exist all over the internet and it's the rise of these, not the platform, that is creating a lot of the instability we have seen over the last few years. Again, it is financial illiteracy that is the issue here not any specific platform.

If we are in the market to protect people from themselves though, options trading should be the thing regulators go after.

[Au165]

(12-16-2020, 05:51 PM)michaelsean Wrote: Day trading is just stupid for 99% of people. Remember when everyone thought they were investing geniuses during the dotcom era?

I bought my wife's wedding ring doing it about 12 years ago in college, but my buddy essentially lost a year of tuition doing it. The thing is there are things like short selling and options that provide limitless abilities to lose money beyond something going to 0 that can cause immense amounts of financial damage to those who don't understand them, that's what happened to my buddy.

[Goalpost]

(12-16-2020, 06:02 PM)Au165 Wrote: Go check out the subreddit Wall Street Bets to see what I am talking about. It's 1.7 million people who essentially approach the stock market as gambling. They aren't alone in this, this kind of groups exist all over the internet and it's the rise of these, not the platform, that is creating a lot of the instability we have seen over the last few years. Again, it is financial illiteracy that is the issue here not any specific platform.

If we are in the market to protect people from themselves though, options trading should be the thing regulators go after.

Never heard of the site but went to it.  Couple posts like take your 70 thou and turn it into a million.  Make a thousand today and 365 a year.Some option talk.  I'm not that.  Mutual funds and a few stocks.  Core holder, long term investor type.  I would never think i could out smart the market or time it.  Diversify is the safest way to play it.  Learn enough, maybe pick a few stocks here and there.

[Au165]

(12-16-2020, 07:23 PM)Goalpost Wrote: Never heard of the site but went to it.  Couple posts like take your 70 thou and turn it into a million.  Make a thousand today and 365 a year.Some option talk.  I'm not that.  Mutual funds and a few stocks.  Core holder, long term investor type.  I would never think i could out smart the market or time it.  Diversify is the safest way to play it.  Learn enough, maybe pick a few stocks here and there.

Right, the point was to show you and others that this is what younger traders are going for in terms of investment strategy. They essentially crowd source trading advice from places like that where half the posts are sarcasm and lose their asses. 8-12% returns aren’t sexy, they want 200% returns which requires massive gambling and over aggressive tactics that create unpredictable market outcomes like Tesla going up for absolutely no reason.

It’s not a Robinhood issue it’s a financial illiteracy issue.

[NATI BENGALS]

As long as there are necessary notifications to warn about the fact you can lose money I don't see the problem. Nobody is guaranteeing returns.

People can go buy lottery tickets here in Ohio with the state backing them.

[Au165]

Figured I'd just mention it here since it's kind of related. Bitcoin has gone up 12.5% today 25.% for the week and 40% for the month with no real reason. Where this gets even worse is many other cryptocurrencies that have nothing to do with Bitcoin are up similar numbers for no other reason than they are also cryptocurrencies.

[fredtoast]

(12-16-2020, 08:47 PM)NATI BENGALS Wrote: People can go buy lottery tickets here in Ohio with the state backing them.

The only time in my life when I bought lottery tickets was when I was flat broke.  I never bought piles of them like some people do but I did buy them.

[Goalpost]

(12-17-2020, 12:54 PM)Au165 Wrote: Figured I'd just mention it here since it's kind of related. Bitcoin has gone up 12.5% today 25.% for the week and 40% for the month with no real reason. Where this gets even worse is many other cryptocurrencies that have nothing to do with Bitcoin are up similar numbers for no other reason than they are also cryptocurrencies.

Bitcoin is complex.  I can understand its creation, but myself, don't see other countries tying their currency to it.  It has more acceptance from certain companies though.  I hear Paypal is close to, or does, accept it.  

[Au165]

(12-17-2020, 03:04 PM)Goalpost Wrote: Bitcoin is complex.  I can understand its creation, but myself, don't see other countries tying their currency to it.  It has more acceptance from certain companies though.  I hear Paypal is close to, or does, accept it.  

I have been involved in crypto as a speculative play for a while now. It is too volatile to ever be a currency. No one is going to pay in something today that tomorrow could be worth 25% more. All these new coins come out and they always claim they will be a stable coin that will give it utility purpose and eventually they become volatile and eventually useless. 

[NATI BENGALS]

(12-17-2020, 03:04 PM)Goalpost Wrote: Bitcoin is complex.  I can understand its creation, but myself, don't see other countries tying their currency to it.  It has more acceptance from certain companies though.  I hear Paypal is close to, or does, accept it.  

I was surprised to see the option to buy Bitcoin through the PayPal app at no charge through the end of the month. Apparently I’m a jackass for not doing it because I saw that a couple weeks ago and could’ve been up 25%