The stock trading app Robinhood stopped users from trading GameStop and other short stocks. CNBC. GameStop was being shorted by Melvin Capital, a hedge fund, but retail traders from r/wallstreetbet and /biz/ were buying the stocks, leaving Melvin Capital responsible for the shorted stocks. In response Robinhood stopped users from buying GameStop and other short stocks like AMC theaters and Nokia. Some users were only allowed to sell their shares while others were forced to do so with Robinhood arguing they did not have enough collateral. The move called massive bipartisan outrage from both Democrats like AOC and Republicans like Ted Cruz. Robinhood reversed course after trading ended with new trades now being allowed with some restrictions.
My Comment:
Again, like I said yesterday I am no expert on economics and stocks. I think I understand what is going on but I could be wrong on some things so keep that in mind. I figured that was a necessary disclosure as unlike most of the topics I discuss here I have some expertise in what I am talking about. Not so much in this case.
I'm fairly disgusted with what Robinhood did here. For an app that launched saying that they would bring investing to the people, they screwed over the little guy. And unlike the mythical Robin Hood, they were stealing from poor to give to the rich. I don't buy any of their excuses, they did this because they were pressured by the hedge funds and gave in almost immediately.
They weren't the only investing firm to do this as several of the other big players did the same thing or otherwise restricted trading on the short stocks. Robinhood is getting most of the flack but there was a coordinated effort to try and stop people from trading the shorted stocks and it actually worked. GameStop's stocks lost a lot of money before trading closed.
The good news is that investors have found a way around Robinhood. They are using other apps now and overnight trading shows that GameStop is going up again, along with many other stocks. These people will make money as long as they hold out until the mandatory buyout which should make a lot of people rich.
Despite noise from both the left and the right I don't expect anything to be done about it. Democrats like AOC and Elizabeth Warren are making a lot of noise but they don't actually want to help the little guy. Instead they want to tax hedge funds to pay for their own projects. And the GOP can say whatever they want but the truth is that they aren't in power. If anything is done it will be a new tax on hedge funds and not punishment of Robinhood.
I also think that this incident shows that the real divide in this country isn't really Republican vs Democrat it's elite vs everyone else. The second the elite's interests are threatened (and what could be more elite then a hedge fund like Melvin Capital) the elites push back so that the little guy gets screwed over. Indeed, the reason this happened in the first place is that the people from r/wallstreetbets were sick and tired of the big hedge funds were doing and decided to beat them at their own game.
I think this is just the latest incident in a trend where people are sick and tired of the establishment. That was what President Trump was about, that was what Bernie Sanders was about and that was what the Capitol counter-coup was about. People just aren't having it anymore. I think this country is a lot closer to a civil war than people want to admit.
And this is a good example why that is the case. The normal people of the country, well as normal as reddit and 4chan autists can get, found a way to finally make some money and the powers that be decided to shut them down. Sure, the hedge funds were losing money but they agreed to that risk when they shorted the stocks.
But the powers that be? They wouldn't have any of it. Nobody can threaten the elite and get away with it. So they pressured Robinhood and then the stock dropped. Just like when the people tried to stop the theft of the election they arrested everyone and claimed that everyone was a "white supremacist" or "conspiracy theorist". Like they didn't have actual complaints that should have been addressed.
So what happens next? I have no idea. In theory the redditors have won, the stock price is going up in overnight trading and in theory if they keep holding onto it they will get their money. But a lot could happen tomorrow that could change that. It's possible that Wall Street itself will move on the redditors and they will end up losing in the end. I hope that is not the case but we will just have to wait and see what happens...
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