If the federal government steps into bail out the hedge funds not to mention those backing them up that have held short positions on GameStop, there will be serious repercussions.
Here’s how it could happen. What if CALPERS, for example, has substantial money invested in one or more of those hedge funds?
They message it as a group of outsiders taking down the evil hedge fund operator, but common sense says no one will bankrupt himself in the attempt to save GSE. Those who started the meme were first in, they’ll be first out. Lotta people gonna get burned when the stock drops, which it must. This is a Ponsi scheme disguised as altruism and social consciousness. It’s collusion and must be regulated.
Interestingly, now Reddit joins the rest of social media under the microscope.
On the other hand, Robinhood’s shutting down the trades in order to protect the hedgefunds sure looks like some sort of payoff. Some of Robinhood’s investors have hedgefund connections.
I’ve been following this fairly closely and it looks very bad. All the retail trading apps have unilaterally prevented retail investors from doing anything with these stocks except sell. There are now reports that the Robinhood app is selling shares of these stocks without the customer’s assent or permission.
The political fallout from this could be much worse than any financial losses.
Considering the money involved, this is all going to be litigated in court with discovery of every communication in the decisions involving the brokerages restrictions on Gamestop et al.
But the SEC does not have a confirmed chairman yet, so it is hard to see how the Federal Government was involved in these decisions.
That’s how I see it. Plus there could be a sort of domino effect among hedge funds. Unless people forget about this it’s hard to see how Robinhood can survive the backlash and lawsuits.
You mean like Ken Griffin and Citadel?
The speculation is that since Robinhood is owned by some of these big institutional players, that those players are willing to sacrifice it to put the retail investor class back in their place.
I have no information to know if any of that is true – as far as I know, it’s speculation in the truest sense of the word, but that’s what many are currently alleging.
But it’s not even Robinhood. TDAmeritrade (where I have an account actually, which used to be a Scottrade account), is doing the same thing, but not (yet) calling margins early or selling shares as Robinhood might be doing.
There is something to the adage “you get what you pay for”.
When buying / selling stocks had commissions; the retail brokerage had incentive in helping the customer buy/sell stocks the way the customer wanted to, i.e. the retail investor is the customer.
With the move to zero-commissions; brokerages are switching to alternative models to making money — i.e. the retail investor is now the product.
Heh. I pay little attention to public markets. But I took a quick look and it sounds like a vanilla pump and dump.
Life is too short to go through fat, dumb and in the shorting stock game. A pox on all of them. Speculation assists price discovery and provides liquidity. This is rank market manipulation.
https://www.zerohedge.com/markets/cash-strapped-robinhood-scrambles-raise-1-billion-rich
Heh.