# RobinHood must be banned



## robfordlives (Sep 18, 2014)

This folks is why the market is in bubble territory. Take this guy's mentality (or lack thereof) and multiply by millions of users. What can go wrong???


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## james4beach (Nov 15, 2012)

I think of the young investors at Robinhood as more of a symptom, but I doubt they are the cause. These young people don't have much money. They are buying a few shares of these things. They just don't control that much money... how can they be causing a bubble?

I think it's more likely that the institutions and hedge funds are the powers behind the momentum.

In any case, it should be a good show.


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## MrBlackhill (Jun 10, 2020)

I don't know if Robinhood users can truly effect the market, but there's certainly an article somewhere which would tell how much power they have.

That video is about a guy investing 1000$, but there are YouTubers out there making in the 5 figures "youtubing" and they have 5 figures invested. Robinhood has more than 10 million users and the top 10 stocks are each owned by at least 500k Robinhood users. If each user has on average 1000$ invested in each stock, that's still 500M$.

(Talking about Tesla)


> The 69% jump in Robinhood accounts that own the stock was accompanied by a 32% jump in Tesla's stock price in July, signaling that investors are going full FOMO in Tesla shares.











These were the 10 most popular stocks on Robinhood in the month of July


Robintrack is a platform that utilizes data from Robinhood's API to track how many Robinhood users own a particular stock over time.




markets.businessinsider.com


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## andrewf (Mar 1, 2010)

Retail investors don't have much money, particularly young ones.


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## Topo (Aug 31, 2019)

I doubt the traders on Robinhood have a lot of money invested, but it is possible that big money is buying and holding while Robinhood traders are actively trading amongst each other. That could give Robinhood traders an outsized representation in price discovery, etc.

My guess is that Robinhood traders are fickle and once a 5-10% pullback kicks in, they will scurry away.


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## MrBlackhill (Jun 10, 2020)

I think it's hard to tell.

Retail traders have less money but they are more numerous and they diversify less.


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## Rusty O'Toole (Feb 1, 2012)

Is this guy a moron or just acting that way for lulz and clicks? With $1000 AUM I suspect he is a high roller among Robin Hood users. But if there are a million of these lemmings that may be enough to bull some stocks.


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## peterk (May 16, 2010)

What exactly is this RobinHood thing?

Is it just a robo advisor app like Wealth Simple?

I hardly think these apps are what's causing the market to go higher.


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## peterk (May 16, 2010)

Dupe


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## MrBlackhill (Jun 10, 2020)

peterk said:


> What exactly is this RobinHood thing?
> 
> Is it just a robo advisor app like Wealth Simple?
> 
> I hardly think these apps are what's causing the market to go higher.


No, on Robinhood you can buy stocks, ETFs, options and crypto. You can even buy fractional shares. And all that is commission-free.


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## james4beach (Nov 15, 2012)

Robinhood started this commission-free model. I think it's done with a combination of very low fees (hardly any staff or support), plus they sell the order flow to certain entities. It's structured as a mobile phone application program, with a bit of a game-like vibe, to attract young people and help them get addicted to interacting with it (trading). That's the point of many apps, after all. Even Facebook.

Robinhood is designed to appeal to novice, bad traders, and encourage their gambling instincts -- turning them into even worse traders.

The no staff or support part is pretty easy. There just isn't anyone to reach, and the regulator receives a ton of complaints about poor availability and uptime, and people being unable to reach any staff.

The other part that's more interesting is that Robinhood sells order flow to certain Wall Street firms. This means that all trades go through a firm, and Wall Street is willing to pay Robinhood to get all the order activity. That's how Robinhood makes money. As I understand it, there are two reasons Wall Street pays for order flow:

1. this lets the intermediary get in the middle of trades
2. Robinhood users are the worst traders on earth, so it's useful to see their trades

In practice this means that Robinhood users get a bit worse of a fill price (worse execution) than someone who uses a proper brokerage, but it's hard to quantify how much $ is lost this way. My guess is that the second point is the more important one. If you know that the retail traders make horrible decisions, you can trade against them very nicely.

Here's a little-known fact. Bernie Madoff (of ponzi fame) is actually the guy who invented the payment for order flow business model. His business (and this is separate from his ponzi operation) wanted to have a way to make retail traders go through some intermediary, monetizing their horrible trades.

As I understand, this idea was studied in business schools at the time and debated as an ethics question. Is payment for order flow ethical? So people knew at the time that it was a sketchy idea. And let's remember, this is MADOFF coming up with this idea. (sources for all this)

Robinhood has successfully built a business around that, and monetized it. Payment for order flow is a very tricky business, and personally I think that Wall Street derives more value from it than we think. The fact we cannot quantify the harm to the retail investor is probably a good indication that some very sharp PhDs have found an excellent new way to rip off retail investors -- because they can't be called out on it (yet).


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## james4beach (Nov 15, 2012)

There's also some amazing irony in the term Robinhood.

Robin Hood's thing was to steal from the rich and give to the poor. But let's think about what this company does. By pushing users into addictive or compulsive trading, the company is able to create the worst traders on earth. Worse than any other brokerage has. This helps the company use Madoff's scheme and monetize these traders. The fact that Wall Street buys the order flow shows us they profit from it somehow. And we all have trouble figuring out exactly how much value (or harm) the users experience. This really illustrates Wall Street doing is typical scumbag trickery. This is the reason people hate Wall Street -- it's because their idea of "innovation" is to constantly come up with new ways to rip off people.

I don't buy the story that it's somehow win-win for both the app users and Wall Street. The fact we haven't figured out exactly how they're ripping us off does not show they are being benevolent. Based on history, it likely shows that they have just come up with a _really good way_ to rip us off.

It's very likely that Robinhood helps steal from the poor and give to the rich.


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## newfoundlander61 (Feb 6, 2011)

I have never heard or listened to this guy, I will continue on that path


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## Beaver101 (Nov 14, 2011)

"RobinHood" aka the "Hood" with the Robin on this one ...


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## robfordlives (Sep 18, 2014)

As to the question of whether that guy is slow or not, not sure but all his videos are like that. His thing is to try new businesses to see if they work out. He epitomises the 'side hustle' culture

Just go to reddit wsb (wall street bets). I think you guys underestimate the impact. Many have made millions doing call options since April. These are highly paid computer engineers and the like...they are not putting in "hundreds", they are putting in their entire paycheques into options and it has worked out fabulously for most of them. Us dinosaurs get left behind again needing decades to save that kind of dough


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## off.by.10 (Mar 16, 2014)

james4beach said:


> It's very likely that Robinhood helps steal from the poor and give to the rich.


Not much different than lottery as far as I'm concerned. None of the users were forced into it.

Besides, is it worse to feed cash into Robinhood or into upgrades for some random game where you won't see any of the money ever again? One could argue that turning bad habits into slightly less bad habits is a good action. Sure, Robinhood is not the best use of your money. But it's far from being the worst either.


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## james4beach (Nov 15, 2012)

robfordlives said:


> Just go to reddit wsb (wall street bets). I think you guys underestimate the impact. Many have made millions doing call options since April.


You've got to watch this video. It explains the culture pretty well, including the saga of analfarmer2

The Absolute Chaos of r/Wallstreetbets


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## james4beach (Nov 15, 2012)

Right on cue, the SEC has a new probe into Robinhood's practice of using the Madoff scheme (payment for order flow) as I outlined above in post #11

WSJ News Exclusive | Robinhood Faces SEC Probe for Not Disclosing Deals With High-Speed Traders

Robinhood has paid out settlements before for similar violations. They paid a $1.25 million fine in 2019 for failing to ensure best execution.



> The Financial Industry Regulatory Authority, a supervisor of brokerage firms that reports to the SEC, said Robinhood didn’t take sufficient steps from October 2016 to November 2017 to ensure it was getting the best prices for customer orders.


There are actually two probes into Robinhood right now: the SEC is looking into their payment model (and whether executions are fair), and the SEC + FINRA are looking into their lengthy outages.

It also wouldn't surprise me if, one day, there is a class action against Robinhood for deliberately trying to addict customers using common techniques from the gaming and casino industry.


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## junior minor (Jun 5, 2019)

“They encourage people to go from training wheels to driving motorcycles,” The NYT story tells all that Tory Canadian Media won't Robinhood Has Lured Young Traders, Sometimes With Devastating Results


https://www.washingtonpost.com/business/2020/03/18/investors-weather-wild-markets-coronavirus-fears-broken-robinhood-trading-app/


I don't think trusting something that just suggests you can make lots of money, takes most of it when you buy and ''crashes'' or refuses to sell when you need it... that's like those crook casinos that will overload a credit card and then refuse that you cash any of your gains.


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## james4beach (Nov 15, 2012)

This video talks about the new SEC investigation into Robinhood, and their payment for order flow.

Patrick Boyle notes that payment for order flow is banned in the UK. He also says: "high frequency traders are not charities . . . The only reason [they] pay Robinhood tens to hundreds of millions of $ for order flow is *that they feel like they can exploit the retail customers for far more than they pay Robinhood*".

He also says that what Robinhood does is no worse than the shenanigans of brokers in old days of Wall Street (umm... that's not exactly good news). Basically, this is just a new spin on old Wall Street tricks. Brokers and market specialists have a long, proud history of ripping off retail investors. Remember, we are muppets to them.

Muppets use Robinhood. A muppet usually doesn't realize they are being ripped off.


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## MrBlackhill (Jun 10, 2020)

Looking at the conversation section of Yahoo Finance and I see that retail traders is a pretty sad world of very emotional people dreaming and having their dreams crushed. They are playing this like a video game, like a slot machine and making lots of non-sense comments and lots of sh*t-talking.

As of today, TSLA has more than 400 000 comments on the conversation section of Yahoo Finance. For comparison, AAPL has 250 000 comments.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Looking at the conversation section of Yahoo Finance and I see that retail traders is a pretty sad world of very emotional people dreaming and having their dreams crushed. They are playing this like a video game, like a slot machine and making lots of non-sense comments and lots of sh*t-talking.
> 
> As of today, TSLA has more than 400 000 comments on the conversation section of Yahoo Finance. For comparison, AAPL has 250 000 comments.


I used to love Yahoo Finance forums, and still follow a couple different stock forums. I agree.. they seem to have a lot of emotional people who are gambling.

From what I can tell, many individual stock-pickers (at least the ones I see) don't use systematic techniques. It's very much ad hoc, emotionally driven stock picking.

One thing I find interesting about this forum is that we have many stock pickers who actually use better techniques. They care about diversification, sticking to established large cap names, etc. You will frequently see portfolios here like "TD, BCE, SU, FTS" which are actually very sensible and probably come from experience dealing with stocks. Not exciting portfolios, not enormous returns, but sensible.

Nobody signs up with Robinhood to invest in TD, BCE, SU, FTS as a buy & hold (link to Portfolio Visualizer) ... though they probably should, since it has a better risk adjusted return than the S&P 500.


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## MrBlackhill (Jun 10, 2020)

I've just watched the documentary called "The Social Dilemma" on Netflix. I started a thread here : The Social Dilemma

It's talking about how everything is engineered to be addictive and persuasive, and how it is manipulating our lives.

Combine Robinhood gamification addictiveness, to greed, to AI persuasive manipulation, to social media influence and we are in for one hell of a disaster. I am not seeing a bright future for the next 20 years.


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## Rusty O'Toole (Feb 1, 2012)

As far as I can tell, the Robin Hood app is a legitimate trading platform. The problem is it allows newbies to make fools of themselves. This is not a new problem, it has been common as far back as there has been a stock market, or for that matter, as long as men have been buying and selling.
The big rush into Robin Hood came about when sports betting shut down due to the Covid epidemic. In other words, they don't care what they gamble on as long as they can get a bet down.
I don't know what can be done about this human propensity to gamble and to make foolish trades. I don't like it myself but don't see how you can stop it, short of shutting down the stock market. And then they will find some other way of losing their money even if it is pitching pennies in the alley.


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## james4beach (Nov 15, 2012)

james4beach said:


> Robinhood started this commission-free model. I think it's done with a combination of very low fees (hardly any staff or support), plus they sell the order flow to certain entities.
> . . .
> The no staff or support part is pretty easy. There just isn't anyone to reach, and the regulator receives a ton of complaints about poor availability and uptime, and people being unable to reach any staff.


Before anyone wishes too hard for Robinhood (or something similar) in Canada, here are some consequences of having no support staff and nobody to phone:

Robinhood Users Say Accounts Were Looted, No One to Call

Hackers got into several accounts and emptied them out. Normally a brokerage might be able to respond and take action quickly, except at Robinhood, there is nobody to call! Plus, a no-frills brokerage like Robinhood immediately becomes the target of hackers because _they know_ there is minimal security and less ability to respond.

Call me crazy but I'd rather pay $10 a trade and actually have staff available, and more people working on security and safety. I actually think we get a lot of value at the big 5 brokerages for only $10 a trade, including the safety and backing of a giant organization, plus the brand & history.


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## james4beach (Nov 15, 2012)

Massachusetts is suing Robinhood, claiming they are a video game masquerading as an investment platform. The regulator says Robinhood is exposing investors to unnecessary risk and failing to maintain their infrastructure, failing in their duty to protect their investors.

Here's the Bloomberg article, and the lawsuit PDF.



> It focuses on the tactics that Robinhood employs to keep consumers engaged, alleging that it encourages them to use the platform through what it calls “gamification.” One Robinhood customer with no investment experience made more than 12,700 trades in just over six months, according to the complaint.


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## james4beach (Nov 15, 2012)

james4beach said:


> In practice this means that Robinhood users get a bit worse of a fill price (worse execution) than someone who uses a proper brokerage, but it's hard to quantify how much $ is lost this way.


The SEC has now quantified it. They just charged Robinhood, and the company paid a $65 million fine. The details of the charges are in this PDF.

Really important stuff. For the first time we get inside into the hidden costs of "free trading".

When you're buying and selling stocks, good quality order routing and execution typically results in some "price improvement", meaning a slightly better fills. But when Robinhood or another broker goes the zero commission route, they sell your order flow to an intermediary and *you lose out* on best fills / price improvements.

Here's what the SEC's analysis showed:

​For most orders of more than 100 shares, the analysis concluded that Robinhood customers would be better off trading at another broker-dealer because the additional price improvement that such orders would receive at other broker-dealers would likely exceed the approximately $5 per-order commission costs that those broker-dealers were then charging. The analysis further determined that the larger the order, the more significant the price improvement losses for Robinhood customers—for orders over 500 shares, the average Robinhood customer order lost over $15 in price improvement compared to Robinhood’s competitors, with that comparative loss rising to more than $23 per order for orders over 2,000 shares.​

Wow! So there's the hidden fee that you get for "free trades". You think you're saving money by not paying the obvious $5 fee, but in fact, you would have had more than $5 price improvement on your order. For larger orders, the average Robinhood customer lost over $15 in price improvement.

So much for 'free trades'.


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## Tostig (Nov 18, 2020)

I'm not sure how the Robin Hood investor loses out if he places a limit order at a specific price and it get filled at that price. Very rarely does my BMO Investorline gets me a better price than my limit order anyways. Also, there was one or two occasions when my order wasn't filled or only partially filled and that was because the underlying stock has very low daily trading volumes or my trade had an odd lot.


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## james4beach (Nov 15, 2012)

Tostig said:


> I'm not sure how the Robin Hood investor loses out if he places a limit order at a specific price and it get filled at that price. Very rarely does my BMO Investorline gets me a better price than my limit order anyways. Also, there was one or two occasions when my order wasn't filled or only partially filled and that was because the underlying stock has very low daily trading volumes or my trade had an odd lot.


It's a very subtle effect (which is why the SEC did a detailed investigation). And yes it isn't obvious. But as the SEC's study shows, the dollar impact is real and significant.

Failing to get a fill is an example of a worse fill. A broker with better order routing might have been able to find you a fill. They might have routed you to additional marketplaces, such as a dark pool, where orders could have been filled.

When retail investors don't get fills at their limit prices, they often revise their limits and "chase the price". That shows an example of the real $ lost due to poor execution & fills. The effect also shows up during times of volatility and fast market movements. The difference between good order execution and bad execution might be the failure to get a fill in a fast moving market.


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## james4beach (Nov 15, 2012)

james4beach said:


> You've got to watch this video. It explains the culture pretty well, including the saga of analfarmer2
> 
> The Absolute Chaos of r/Wallstreetbets


If you haven't watched this "documentary" yet, take a look. The Wallstreetbets forum is now able to move stocks very significantly. For example, they are making Gamestop GME rally like crazy.


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## off.by.10 (Mar 16, 2014)

james4beach said:


> The Wallstreetbets forum is now able to move stocks very significantly. For example, they are making Gamestop GME rally like crazy.


Is there any reliable analysis about this? I find it hard to believe that enough of them are putting enough money where their mouth is to cause this on their own.

I think it more likely to be another form of survivorship bias.


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## james4beach (Nov 15, 2012)

off.by.10 said:


> Is there any reliable analysis about this? I find it hard to believe that enough of them are putting enough money where their mouth is to cause this on their own.
> 
> I think it more likely to be another form of survivorship bias.


I'm suspicious too


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## bgc_fan (Apr 5, 2009)

off.by.10 said:


> Is there any reliable analysis about this? I find it hard to believe that enough of them are putting enough money where their mouth is to cause this on their own.
> 
> I think it more likely to be another form of survivorship bias.


I don't know about solid analysis, but IIRC right after Hertz declared bankruptcy, Robinhood "investors" made the stock price double.


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## james4beach (Nov 15, 2012)

bgc_fan said:


> I don't know about solid analysis, but IIRC right after Hertz declared bankruptcy, Robinhood "investors" made the stock price double.


One complication is the size of the audience which reads the reddit forum. It may have had only a few thousand or hundred thousand members at some point, but I'm sure that many millions of traders now watch r/wallstreetbets

So if trade ideas get posted there, it doesn't mean that the members of that forum drive the price. It might be the millions of other people who read and follow the trades, and some of those may be traders with significant amount of money.

I don't believe that the r/wallstreetbets regulars or Robinhood users have enough money to move markets. But now that other traders (maybe even hedge funds) jump on the same trades, it might be a different story.


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## doctrine (Sep 30, 2011)

off.by.10 said:


> Is there any reliable analysis about this? I find it hard to believe that enough of them are putting enough money where their mouth is to cause this on their own.
> 
> I think it more likely to be another form of survivorship bias.


It's definitely retail traders, and there are hundreds of thousands if not millions of them. There is a lot of money out there; plenty of cash payments from governments, combined with a stock market that has seen virtually no stocks lose money for 10 months now. People are multiplying their money in high risk, short term options as well. So there is plenty of cash and plenty of attitude. 

And yes, other people and traders are jumping on the trades. But my cursory searches of social media, including just this weekend, revealed a _lot_ of relatively unsophisticated investors who fully intended to go "all in YOLO" on stocks like GME and BB and I still see activity like that tonight. Who would go all-in on a stock that jumped 70% on Friday last week after it already moved? New investors are seeing this as opportunity to push it higher. 

Millions of new investors are making a new reality for a select number of companies. "Gen Z YOLO stonks only go up". They are making it real and I wouldn't get in the way.


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## off.by.10 (Mar 16, 2014)

doctrine said:


> And yes, other people and traders are jumping on the trades. But my cursory searches of social media, including just this weekend, revealed a _lot_ of relatively unsophisticated investors who fully intended to go "all in YOLO" on stocks like GME and BB and I still see activity like that tonight. Who would go all-in on a stock that jumped 70% on Friday last week after it already moved? New investors are seeing this as opportunity to push it higher.
> 
> Millions of new investors are making a new reality for a select number of companies. "Gen Z YOLO stonks only go up". They are making it real and I wouldn't get in the way.


Cue the sinister voice saying "this won't end well". But I have no intention of getting in the way. This is a zero sum game and I don't want to be on the wrong side of the sum.

With that said, if the uninformed masses have found a way to use their numbers to beat established large players in some cases, these are interesting times. I wonder how long it will take wall street to engineer a mouse trap. Or if this will implode on its own.


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## bgc_fan (Apr 5, 2009)

james4beach said:


> One complication is the size of the audience which reads the reddit forum. It may have had only a few thousand or hundred thousand members at some point, but I'm sure that many millions of traders now watch r/wallstreetbets


There could be a positive feedback loop, particularly if the stock normally trades at low volume. Just an influx of interested traders on Robinhood could cause an anomaly, which gets picked up by automatic trading algorithms that catch the anomaly and tries to capitalize on it by buying, which causes the prices to go even higher when you consider that there may not be that much liquid stock available.

Just speculation.


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## MrMatt (Dec 21, 2011)

off.by.10 said:


> Cue the sinister voice saying "this won't end well". But I have no intention of getting in the way. This is a zero sum game and I don't want to be on the wrong side of the sum.
> 
> With that said, if the uninformed masses have found a way to use their numbers to beat established large players in some cases, these are interesting times. I wonder how long it will take wall street to engineer a mouse trap. Or if this will implode on its own.


Yawn, good old pump & dump.
Just now they're doing it to "get them".

The only way I'm playing this is if they decide to go crazy and misprice one of my stocks, I'll take advantage.

Funny how the Gamestop/EB Games story has gone from selling ancilliary fan stuff to "used games".
I still like to physically give games as gifts, but honestly the vast majority of our families game spending is digital downloads, for most games they sell in store, they're just a dongle. They might have a copy, but they download updates & patches almost immediately.


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## bgc_fan (Apr 5, 2009)

While reddit traders may be part of the reason Gamestop stock is skyrocketing, the fact that people are trying to short it, and losing big may have something to do with it. GameStop short-sellers lost $1.6 billion in a single day as Reddit traders rebelled against them

I'm sure eventually the stock will crash, it's just a matter of time, but if people have to buy the stock to cover their short bets, I'm assuming that it will keep the stock price inflated? I'm not very good with options or shorts. Reason why I tend to stay away from them.


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## m3s (Apr 3, 2010)

bgc_fan said:


> While reddit traders may be part of the reason Gamestop stock is skyrocketing, the fact that people are trying to short it, and losing big may have something to do with it.


No that's precisely why they targeted it.



> GameStop has about 138% of its float shares borrowed and sold short, the *single most shorted name in the U.S. stock market*, according to FactSet citing the latest filings.


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## james4beach (Nov 15, 2012)

I think Robinhood might collapse, become insolvent.

The media is reporting that they've had to borrow millions of $ on liquidity lines. Then, they raised over $1 billion of capital from their ownership. Those are pretty serious things. You can never get the full picture from such preliminary reports, but supposedly the capital is needed for collateral requirements with their intermediaries.

Robinhood seems like it's run very poorly. They certainly are bad with their risk management and controls, because people have repeatedly found loopholes to exploit their margin lending facilities. And we know that Reddit gamblers are using some massively leveraged options strategies.

The SEC, and at least one state, have repeatedly sued Robinhood for a variety of reasons, showing that this management is generally irresponsible, untrustworthy, and a wee bit crooked (at least). I posted details of recent lawsuits earlier in this thread.

Reckless margin use + poor risk controls + extreme volatility + untrustworthy management = brokerage failure

If these Reddit gamblers were half as smart as they think they are, they wouldn't have used a candy crush game for their trading.


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## james4beach (Nov 15, 2012)

Interesting information on Robinhood I wasn't aware of. This is from a FT article behind a paywall.



> “We made a tough decision today to temporarily limit buying for certain securities,” Robinhood said in a statement late on Thursday. “As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearing house deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.”


So the issue for the company at the moment is the clearing and settlement. The clearinghouses (Depository Trust & Clearing Corporation for equities and the Options Clearing Corporation) requires deposited capital, which protects the clearinghouse against brokerage failure. The problem is that when the broker is on the losing side of a trade, they will have to make big payments. The clearinghouses worry about brokerages blowing up and being unable to pay, so they require capital.

Because of current volatility, the clearinghouses have increased the capital requirements, a sensible measure given the extreme volatility. With this kind of volatility, any brokerage could either make *or lose* tons of money on a given trade.

Robinhood customers are notorious gamblers and pretty crazy with options. That makes them a high risk for non-payment.


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## newfoundlander61 (Feb 6, 2011)

Robinhood narrows trading restrictions to eight companies.

Robinhood narrows trading restrictions to eight companies - BNN Bloomberg


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## sags (May 15, 2010)

Interesting to look at the posts at the start of this thread.

Kudos to the OP @robfordlives for posting about it 5 months ago.


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## Rusty O'Toole (Feb 1, 2012)

RobinHood may be a goner. Their most active traders are leaving in droves. Too much obvious market manipulation.


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## james4beach (Nov 15, 2012)

Rusty O'Toole said:


> RobinHood may be a goner. Their most active traders are leaving in droves. Too much obvious market manipulation.


It doesn't really matter where the gamblers go, to be honest.


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## m3s (Apr 3, 2010)

Rusty O'Toole said:


> RobinHood may be a goner. Their most active traders are leaving in droves. Too much obvious market manipulation.


Stephen Ehrlich (E*Trade) in an interview today says his new app Voyager was adding 100 accounts/min during the RobinHood exodus and jumped to the top 10 apps list

So I checked the list of top apps here in the US and it shows RobinHood as #1. Voyager is coming to Canada and oddly is already traded as VYGR in CAD


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## Rusty O'Toole (Feb 1, 2012)

james4beach said:


> It doesn't really matter where the gamblers go, to be honest.


Read WSB and it's all about long term investors with diamond hands holding Gamestop forever. It's the big hedge funds that are selling it short, speculating and gambling. It seems the long term investors are winning and the speculators are getting soaked, and isn't that how it is supposed to work?


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## Rusty O'Toole (Feb 1, 2012)

james4beach said:


> Interesting information on Robinhood I wasn't aware of. This is from a FT article behind a paywall.
> 
> 
> 
> ...


But they didn't limit the sale of options. They limited the purchase of stocks, and stocks are bought for cash. If you don't have the cash in your account, or a margin account you can't buy. That is not what they did, they limited the purchase of certain stocks like Gamestop to 1 share at a time with a maximum of 5 shares.
Obviously it was not the retail customers ability to pay they were worried about. What could it be?
We know big firms like Citadel pay RobinHood for order flow while the small retail traders pay no commission. That means CItadel is the customer, and the traders are the product.
Citadel and their ilk are short massive amounts of Gamestop and other stocks, and those are the stocks on the "no buy" list. The reason should be plain to see. They are working for their customers not for the retail traders.


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## james4beach (Nov 15, 2012)

Rusty O'Toole said:


> Obviously it was not the retail customers ability to pay they were worried about. What could it be?


There are Robinhood customers buying GME stock on margin. That means they are borrowing money. If leveraged positions go against them, the customer could go underwater.

The clearinghouse raises capital requirements according to the risk they perceive of brokerages. Robinhood needed a way to slow down the equity trading because they were already getting a kind of "margin call" at current levels. If activity kept increasing, Robinhood would have to find even more capital.


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## james4beach (Nov 15, 2012)

Robinhood just had to raise (last day or so) another $2 billion capital. That makes well over $3 billion they've had to raise.

They are drawing heavily on bank credit lines, and also scrambling to get cash.

My guess is that Robinhood will collapse and fail. It's really not good when you hear a brokerage having to do this stuff. The clearinghouse requirements are likely only part of the problem. They probably have something else with margin calls, or something internally that's blowing up.

That's my prediction... Robinhood is toast. That will also destroy client accounts with huge winning positions by the way. The SIPC will insure customer accounts up to 500k, but only 250k for cash. And it can take years to collect on an insurance claim at a brokerage.


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## Rusty O'Toole (Feb 1, 2012)

They could have raised margin requirements or required all cash purchases. No reason to restrict buyers to 1 share, unless they were trying to help their short hedgie friends or, unless they were bucketing orders and had sold more stock than they could deliver.


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## james4beach (Nov 15, 2012)

Rusty O'Toole said:


> They could have raised margin requirements or required all cash purchases. No reason to restrict buyers to 1 share, unless they were trying to help their short hedgie friends or, unless they were bucketing orders and had sold more stock than they could deliver.


Yes they might have mismanaged their stock positions, inventory etc. Many things can cause a poorly run brokerage to blow up.

I think they will collapse.

Noteworthy: unlike stocks and options, the cryptocurrency positions at Robinhood are not insured and will be completely lost.


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## sags (May 15, 2010)

As long as Gamestop is sitting there with more than 100% of their shares shorted, the hedge funds are caught in a trap with no way out.


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## fireseeker (Jul 24, 2017)

james4beach said:


> My guess is that Robinhood will collapse and fail.


I dunno about that. 
The last two weeks have been huge for the Robinhood brand. By now, 99% of Americans have heard of it. They've also probably absorbed some notion that it is for renegades who want to shaft rich guys. (Even if that is not true.)

My guess is that private equity will continue to back the firm. There is value in the business model and the notoriety. Earlier investors make take a haircut, but I'd be surprised if the savvy big-money set just let it die.


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## james4beach (Nov 15, 2012)

fireseeker said:


> The last two weeks have been huge for the Robinhood brand.
> . . .
> My guess is that private equity will continue to back the firm.


You could be right, but here are some counter arguments:

Robinhood's user base is developing a narrative about what is going on, and they seem to currently think that Robinhood is colluding with Wall Street against them as Rusty describes. I think the millennials are rapidly souring on Robinhood. Many other brokerages now have zero commissions as well, so RH doesn't have a particularly unique offering. Even the giant Schwab (which I use; it's excellent and rock solid) added things like stock slices to give people with small amounts of money the ability to trade.

As for private equity backing Robinhood, the last valuation estimate was that the company was worth around $6 billion. In the last few days, Robinhood raised about $3.4 billion of NEW capital, seemingly due to a liquidity crunch. It's very hard to know what's really going on under the hood, and it is a private company.

As you say, it could all be part of a good growth story. They think business will be very strong in the future, and this liquidity crunch is a temporary nuisance, a growing pain. So investors are willing to buy up more shares because they think the long term prospects are great.

I'm not so optimistic though. For a $6 billion company to issue $3.4 billion blazingly fast, while putting out press releases that "everything is OK and all our investors have confidence" is pretty alarming, I think. Imagine a large public brokerage like Interactive Brokers, worth $28 billion market cap, suddenly issues $15 billion in new equity and has their CEO appearing in the media saying "everything is OK, nothing to worry about"

On top of that, I already suspect Robin Hood management is crooked or inept. They have been sued for poor management / administration of their brokerage. There is a Massachusetts (regulator) lawsuit saying that Robin Hood is not protecting the interests of its customers. Remember, we're talking about a brokerage that had such poorly implemented margin systems that users repeatedly found glitches in the brokerage, to borrow far more money than they should have been able to. There are bugs all over that platform.

It's shoddy software that barely works, and the history of their risk management does not inspire any confidence.

*I suspect* that they screwed up the management, and I think the brokerage is blowing up on them. Of course there is no way to know what's really happening.


_This post is purely the personal opinion of this author (who is not a financial professional) and the post should not be taken as advice or a recommendation to make any financial decision of any kind._


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## Spudd (Oct 11, 2011)

Based on the "infinite leverage" bug I have to say they seem inept to the max. Oh, and the box spreads fiasco. Both disasters.


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## fireseeker (Jul 24, 2017)

james4beach said:


> For a $6 billion company to issue $3.4 billion blazingly fast ...


This is why I put on my devil's advocate hat. Raising $3.4 billion with a snap of your fingers suggests there's huge support behind RH.
But this is just one of many threads yet to be unwound. The coda to this affair should be interesting.


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## james4beach (Nov 15, 2012)

fireseeker said:


> This is why I put on my devil's advocate hat. Raising $3.4 billion with a snap of your fingers suggests there's huge support behind RH.
> But this is just one of many threads yet to be unwound. The coda to this affair should be interesting.


It will be interesting! Do you think Michael Cera will be in the movie?

I'm curious to see if Robinhood survives this. It all depends on how solid their risk management is. With GME and AMC positions blowing up, plus crypto koin volatility, some of their leveraged gamblers have likely wiped out their accounts at today's close.

In this situation, Interactive Brokers would have been forcing all positions into liquidation automatically. They do nearly real-time margin calls and although they provide cheap borrowing costs, they are brutal with risk enforcement.

Robinhood though, I guess we'll find out!


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## m3s (Apr 3, 2010)

m3s said:


> Stephen Ehrlich (E*Trade) in an interview today says his new app Voyager was adding 100 accounts/min during the RobinHood exodus and jumped to the top 10 apps list
> 
> So I checked the list of top apps here in the US and it shows RobinHood as #1. Voyager is coming to Canada and oddly is already traded as VYGR in CAD


VYGR up 2.5x in the last week


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## MrBlackhill (Jun 10, 2020)

m3s said:


> VYGR up 2.5x in the last week


Pretty crazy. It was trading at $0.20 on April 2020. Now trading at $14... That 70x.

Even though their revenue has increased fast, certainly nowhere near justifying that 70x.

Anyone who had seen this article on May 19, 2020 and bought some VYGR at $0.265 is now pretty wealthy. At least 50x if managed to keep holding. Just taking a very small position of $1,000, then selling for $50,000 nine months later... I wish I did.









3 Canadian Blockchain Stocks with Great 2020 Growth Prospects


The Canadian blockchain stocks we’ve discovered have investor momentum that is expected to continue in 2020.




smallcappower.com


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## james4beach (Nov 15, 2012)

I spoke with a Wall Street guy, and he believes Robinhood won't collapse.

But he does agree they got close. Said they were getting margin calls with *exponentially* increasing capital requirements. Said it was looking like a Lehman moment for them, but he thinks they are OK now.


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## m3s (Apr 3, 2010)

MrBlackhill said:


> Pretty crazy. It was trading at $0.20 on April 2020. Now trading at $14... That 70x.
> 
> Even though their revenue has increased fast, certainly nowhere near justifying that 70x.


Hard to value it that way imo

Having used all the major exchanges, Voyager is the path of least resistance for the masses. I had one of the first gmail accounts and remember people saying google was overvalued based on revenue. The revenue increased with signups

100 signups per minute got my attention. Coming to Canada and Europe next


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## MrBlackhill (Jun 10, 2020)

m3s said:


> Hard to value it that way imo
> 
> Having used all the major exchanges, Voyager is the path of least resistance for the masses. I had one of the first gmail accounts and remember people saying google was overvalued based on revenue. The revenue increased with signups
> 
> 100 signups per minute got my attention. Coming to Canada and Europe next


I agree that's hard to value.

I don't know if it's a false sentiment, but I feel like most skyrocketing Canadian small caps get some resistance once they reach a market cap of $1B to $2B. That's why I wished I had picked on it early and now I'm cautious.


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## MrBlackhill (Jun 10, 2020)

Just looked and it has 100K downloads on Android with a 3.1 star rating from 1K ratings and I can't even install it because it's telling me it's not available in my country (Canada!). Looking at comments, they were not ready for this surge and they have been doing maintenance which has made some people losing money because the app was down.

It's good to see lots of sign ups, but is this simply an euphoria to try to find simple ways to buy cryptocurrencies and does the app delivers properly to their clients? Client satisfaction is important.


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## m3s (Apr 3, 2010)

MrBlackhill said:


> Looking at comments, they were not ready for this surge and they have been doing maintenance which has made some people losing money because the app was down.


The CEO was interviewed on MSM and youtube about this. He says he never saw that kind of influx of signups as CEO of e*trade since the '90s

I was already on Voyager (US app store) and indeed it was down on Friday. Although unlike coinbase, questrade and all the other exchanges that failed this week, they were the only one that kept me informed and updated.

If you try to sign up with Binance right now (most popular) you are apparently looking at 1 month backlog of verification to deposit/withdraw cash. Crazy times


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## MrBlackhill (Jun 10, 2020)

Entertaining summary of the first half of 2020, Robinhood, WallStreetBets. I hope he'll make another one for the next half and GME.


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## m3s (Apr 3, 2010)

MrBlackhill said:


> Entertaining summary of the first half of 2020, Robinhood, WallStreetBets. I hope he'll make another one for the next half and GME.


2:10 Despite its problems, it's still far better than Questrade. Ouch!


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## MrBlackhill (Jun 10, 2020)

m3s said:


> 2:10 Despite its problems, it's still far better than Questrade. Ouch!


Yes, ouch... I use Questrade...


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## m3s (Apr 3, 2010)

Me too

I think it refers to Questrade issues 10 years ago. I used it then and it was very different. Like you had 3 different logins and your balance would randomly disappear some nights hah

But $4.95 trades before RobinHood existed


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Entertaining summary of the first half of 2020, Robinhood, WallStreetBets. I hope he'll make another one for the next half and GME.


That's the video I posted on page 1. Yeah, it really explains the culture well. Everyone should watch that!


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> That's the video I posted on page 1. Yeah, it really explains the culture well. Everyone should watch that!


Oh and I even gave a "like" to your post. Bad memory. But a great video to watch again, haha.


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## MrBlackhill (Jun 10, 2020)




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## james4beach (Nov 15, 2012)

MrBlackhill said:


> (SouthPark)


This is one of the best South Park episodes of all time.

Brings back memories. I was actually trading the market pretty aggressively in 2007-2008 and it was exhilarating. I won't ever do that again... fun but stressful. I got something like a panic attack the first time I watched the movie The Big Short (too real)

Not because I lost money but because the trading was so crazy. What a wild market. So I can understand what the GME and Bitcoin traders are having fun with. Things can be pretty fun during unhinged markets.

With more experience though, I've shifted towards strategies that are easier, more sustainable, and more like a marathon (than a sprint). The goal is to achieve a good CAGR in the very long term.


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## james4beach (Nov 15, 2012)

It seems that Charlie Munger (97 years old) is learning a bit about social media.

Munger compared the Robinhood crowd to gamblers betting on racehorses, and warned that it's a bad idea to crowd into short term trades. Munger also said, very correctly, that Robinhood's practice of "luring amateurs" with free trades, is a dirty way to make money.

Robinhood tweeted back a shot at Munger, which was followed by a social media blowback directed at the 97 year old.

A friend recently reminded me that this kind of aggressive arrogance of novices is something he saw in the late 90s as well, during the dot com bubble. It certainly makes sense, since you get overconfidence near the top of a market cycle. On one hand you want to help the novices, but a part of you also says: _man, these young people sure are asking for it._


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## MrMatt (Dec 21, 2011)

james4beach said:


> It seems that Charlie Munger (97 years old) is learning a bit about social media.
> 
> Munger compared the Robinhood crowd to gamblers betting on racehorses, and warned that it's a bad idea to crowd into short term trades. Munger also said, very correctly, that Robinhood's practice of "luring amateurs" with free trades, is a dirty way to make money.
> 
> ...


Well if you're going to listen to a bunch of anonymous twitter handles, instead of a respected billionaire with decades of experience, you deserve the results.

Social media is just a mob, and should be treated as such.


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## bgc_fan (Apr 5, 2009)

Don't know how many people frequent Reddit, but there's an interesting post about RobinHood and what is going on behind the scenes. I'm not tracking the whole process, but my takeaway is that it is essentially a stock manipulating entity meant to make money on shorts. Which is why the whole GME fiasco blew up in its face and needed capital injection from other companies.


__
https://www.reddit.com/r/GME/comments/m74e3g


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## MrMatt (Dec 21, 2011)

bgc_fan said:


> Don't know how many people frequent Reddit, but there's an interesting post about RobinHood and what is going on behind the scenes. I'm not tracking the whole process, but my takeaway is that it is essentially a stock manipulating entity meant to make money on shorts. Which is why the whole GME fiasco blew up in its face and needed capital injection from other companies.
> 
> 
> __
> https://www.reddit.com/r/GME/comments/m74e3g


Interesting, in your link they claim 40% of all Robinhood accounts held GME.

That's not a shocking number, 9% of Americans bought GME, and I'd expect that maybe only a portion of Americans actually trade individual stocks.

Forgive the horrible headline.


https://ca.finance.yahoo.com/news/gamestop-amc-reddit-investing-213609595.html


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## james4beach (Nov 15, 2012)

MrMatt said:


> Forgive the horrible headline.
> https://ca.finance.yahoo.com/news/gamestop-amc-reddit-investing-213609595.html


This article says that 28% of Americans bought viral stocks (GME & friends) in January. Could this be true? I find this hard to believe... that's such a crazy number.

If these small guys really wanted to do something big they would make a viral push to get everyone to buy SPY or VT. If 1/3 or 1/2 of Americans actually bought these benchmark ETFs and held them for over a decade, they'd be much better off.

I just find it kind of sad that social media (viral marketing) finally gets Americans interested in stocks, and they buy worthless gambling tickers instead of actually investing in their futures.


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## james4beach (Nov 15, 2012)

@MrMatt this poll can't be for real. Only 1000 adults. Those %s are too crazy, too high. The poll must be flawed.


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## MrMatt (Dec 21, 2011)

james4beach said:


> This article says that 28% of Americans bought viral stocks (GME & friends) in January. Could this be true? I find this hard to believe... that's such a crazy number.
> 
> If these small guys really wanted to do something big they would make a viral push to get everyone to buy SPY or VT. If 1/3 or 1/2 of Americans actually bought these benchmark ETFs and held them for over a decade, they'd be much better off.
> 
> I just find it kind of sad that social media (viral marketing) finally gets Americans interested in stocks, and they buy worthless gambling tickers instead of actually investing in their futures.


I think they have serious problems with their sampling bias.
I'd imagine online polls would have disporportionate numbers. But then their summary is blatantly wrong.
Again, that's why I'm quick to disregard bad articles, or bad research.


However if you accept that 10% of people looking at online stock investing bought gamestop, i wouldn't be surprised that those traders are disproportionately on robinhood. 
For example here we read on online stock investing, and our GME purchases were much more limited than a stereotypical millennial Robinhood investor.


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## MrBlackhill (Jun 10, 2020)

A new list of famous WSB YOLOs.


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## off.by.10 (Mar 16, 2014)

MrBlackhill said:


> A new list of famous WSB YOLOs.


The ads I got while watching that are hilarious. It's like a con man compilation. Make sure you watch from a private browser window so they're not tainted by your own history.


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## MrMatt (Dec 21, 2011)

off.by.10 said:


> The ads I got while watching that are hilarious. It's like a con man compilation. Make sure you watch from a private browser window so they're not tainted by your own history.


FYI, I have several accounts/browsers I work from, I do this specifically so each one has a different advertisign/search profile.

The great example is my "wood" account vs my "electronics" account, so that things like "routing" give good results.


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## MrBlackhill (Jun 10, 2020)

Robinhood files for IPO


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## m3s (Apr 3, 2010)

SEC talks about banning payment for order flow

Interesting they wait until after Robinhood went public to ban its business model


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