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RobinHood's sound bites about "protecting the investor" seems fairly disingenuous. 50% of their customer base holds GME and were locked out from buying more. The price fell like a rock and anyone who purchased on margin was liquidated, driving the price down even further. That looks like an attempt to squeeze the longs using dubious practices.
I'm surprised by how many people are on the side of the plantation owners.
And the day came when the risk to remain tight in a bud was more painful than the risk it took to blossom
I think one thing we can all agree on is that the teachings of Jesse Livermore are once again shown to be as prescient as they were nearly 100 years ago.
I seem to remember the tale of how he cornered the coffee market, and those on the other side went and squealed to the government, they changed the rules and he lost his advantage. His lesson to us all? The big boys make the rules and they will change them at any time to keep their advantage.
Now apply that to bitcoin etc. Thanks Mr Livermore!
Another thought is does anyone. I mean anyone. Think borrowing money to buy stocks is a good idea? Mike maybe you can put up a poll. I know used tactically it can enhance returns but so what? Seems like it creates many more problems than it solves.
Allow short sales only if the seller has 110% cash available to cover. What am I missing?
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People should read this again. I know it contradicts all the conspiracy theories that people would like to believe but it explains what happened. Broker/Dealers have capital requirements. RH was in danger of breaking there's. Hence they suspended trading in the issues causing the problem and raised additional capital. Now its no longer an issue they have reopened trading.
Saying all that though if I was this guy I would be very upset. But it looks like he was buying on margin, and things liket his happen when you do that.
The investigation will revolve around who is responsible for the "pump up" and cheerleading. Keith P. Gill, AKA "Roaring Kitty" and "DeepFuckingValue," the most visible cheerleader, is a financial advisor/analyst from Massachusetts who may have broken some rules by providing personal investment advice and stock recommendations using social media. He's not a normal Joe, mom&pop investor placing a bet. It's possible he broke the rules by creating a virtual "boiler-room" using social media. And even if he were a regular Joe, it's still not legal to offer investment advice using an public means of dissemination without following proper protocol.
Many like the idea of a little guy getting one over on the big guys and fat cats. But then there's valuation and then... there's valuation.
When the short selling hedge funds came in to short, they targeted a relatively poorly manage company whose financials and outlook justified selling it. When Roaring Kitty and the merry band of Redditors on WSB decided to buy it they did so betting that they could raise the price well above the threshold that the shorts paid for it causing a short cover(buy back of the borrowed stock). Sure, they sprinkled in a little fanciful notions that it could help GME as a company and that GME has a viable future. But there was no serious fundamental analysis in that regard. I mean, the insiders were selling stock to the tune of hundreds of thousands of shares in Nov and/or Dec. The play and intent was to get an explosive short cover rally on a stock that had a %short to float ratio of 140%.
All of that is perfectly legal for every TD Ameritrade, E-Trade, IB, Robinhood, et al customer to buy into.
The grey area of legality comes in with regards to those who initially gave the advice to do this. There's a protocol to follow when publicly advising on what stock or investment to buy or sell. If any of those rules were broken by the initial persons who recommended these buys, then there will be legal consequences for them.
The next level of consequence could come with making it illegal to use social media to informally and publicly recommend investments without the proper protocol. (You know the proviso at the end of a prospectus, "past result are no guarantee of future profits" or some such).
Does the government/regulators need to protect the public? I say maybe. Many do not understand how the markets work. There are all sorts of incorrect statements being made on social media about market mechanics and strategies and how the PDT rules work. But the one thing they do understand is profit and loss. The real problem is when the little guy gets hurt through his own doing (ignorance), he cries foul. Politicians look at that as an opportunity to impose legislation (arguably good or bad). There is increased talk of instituting a Financial Transaction Tax to tamp down on speculation. Something many little guys who know very little about the markets are attracted to thinking it will stick it to the big guys but which will hurt they themselves in the process.
I remember the days of SEOS banditry and the subsequent PDT rule in 2001 that was partly a consequence of the little guys dreaming to be like the SOES bandits and getting one over on the big guys (market makers).
Mmmmm - If you don't have the money to go short - don't go short. Simple! They got caught like a lot of folks in the 99-2000 bubble. Really long and everyone (the big houses went short) The little guy didn't have a chance to buy put-s or go short to re-coup losses. Just had to take a 15 - year savings loss. Damn! Get your big boy underwear (or shorts - Ha! (pun)) on - they lost and I did in 99-2000. Not what a lot want to hear - but it's true.
Yeah, They broke the banks but did the little guy really break the rules? The banks were in excess of 100% short, they touted their shorts on squawk boxes and live streams and told everyone why they needed to be short while already in their positions. The reddit guys touted Game Stop on their sub-Reddit, told everyone why they need to be long and won.. Were the rules really broken?
