The Prince and the Pauper: Separated at Birth?

For those of you following the most excellent adventures of Gamestop and Robinhood, does anyone else think these two look like they were separated at birth?

On the left: Vlad Tenev, CEO and Co-founder of Robinhood. On the right: Keith Gill, the self-described "normal guy" who reportedly drove the GameStop stock frenzy by posting on a Reddit forum called WallStreetBets.

Take away the tuxedo and the gypsy headband, making one look rich and the other look like a marginalized protester of something or other, I think these two look like they were separated at birth. The eye shape, the bump on the bridge of the nose, the thin upper lip and fuller bottom lip, the mustache and random spots of growth despite looking recently shaven, the chin, and the bob in the Adam's apple. Gill's eyebrows are a little fuller, but the arch is pretty much the same. Hair color, check. Hair length: check. [More...]

But they couldn't be more dissimilar. One co-owns a billion dollar company he and his buddy from college spent years creating and fine-tuning. They employ lots of people. They are financially educated. Their website provides educational resources to both customers and and non-customers on the stock market and trading.

The other photo belongs to a nobody working until recently from his mother's basement. Because he was unemployed, he got to be a stay at home dad to his young daughter. For some idiosyncratic reason, he began buying Gamestop shares in 2019 and like an itch he just had to scratch, couldn't stop buying them and refused to sell them. He created a You Tube channel (free for anyone who wants one) got a microphone and a headband, and started talking about investing in stocks.

For whatever reason, he picked up a following. (The headband? the gypsy look? Nostalgia for the Occupy Wall Street days? Who knows? He's certainly not my idea of a Pied Piper.) More importantly, he started posting on Reddit, a social media forum with visuals reminiscent of a bulletin board from 1998. Apparently, he became a "hit."

Now people are dumpling on Robinhood. Why? Because in order for them to finalize their customer's trades, they need the services of "clearing houses" and the ones they use have appropriate licenses and are found, guess where? On Wall Street. Which according to the critics, makes them hypocrites or liars.

I don't see it that way. And I'll admit up front that I don't know anything about investing in the stock market other than what I've learned defending people charged with financial fraud crimes. But how different is buying a stock from buying a house? If you've ever bought or sold a house you know there's someone else involved in the transaction besides the buyer, the seller, the realtor, the appraiser and the mortgage company. Who is it? The title company.

Without the title company working in the background to render its opinion that the seller's title is valid (and not encumbered by judgments or easements or other stumbling blocks), the sale can't go through.

Companies that facilitate stock trades like Robinhood or Charles Schwab or Ameritrade use clearing houses to say yea or nay to the stock transaction. The trading companies are like bookies -- they get the juice, not a piece of the pie. And if they aren't charging their customers to make trades, they have to get it somewhere else. I don't recall any of the trading companies claiming to be "non-profits".

So I don't get all the anger at Robinhood. I checked out their website for the first time the other night, in preparation for this post and was was impressed enough to open a free account. I'm not sure what I'll do with it since I don't own any stocks and they certainly seem more geared to Gen Z than baby boomers close to retirement age, but I think I could be persuaded to dip a toe in once or twice. How different is it than buying 10 lottery tickets when the jackpot is high? What could the return be on a $20 investment in a piece of a bitcoin or a 1/20 share of Apple? Come to think of it, the lottery odds are probably better.

As to short sales and options: As far as I'm concerned, anyone who doesn't take a few classes or educate themselves but instead takes advice from strangers on a social media forum deserves to lose their money. I think Robinhood is doing a good service by giving out free lessons.

My final thought: If every one would remember what they were told the first time they went to Las Vegas -- "only bet what you can afford to lose", the investment world would be a safer place. Las Vegas is not the place for someone hoping to make the money for their mother's cancer operation -- and neither is the stock market or options trading.

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    I don't get this (none / 0) (#1)
    by CaptHowdy on Tue Feb 02, 2021 at 07:41:48 AM EST
    I also know squat about investing.  It just seems like a different version of planting a virus to me.  No one seems to benefit in the long run?

    they are now trying to blow up the Silver Market.

    That seems like it could have far reaching effects.

    I have never heard an argument for doing this I could follow.  Vague stuff about sticking it to the man.  If anyone could provide one please do.

    I am all for killing the idea Wall Street in any way is reflective of the economy. If that's the goal it might be ok.  Or not.

    IMO (none / 0) (#2)
    by jmacWA on Tue Feb 02, 2021 at 08:44:00 AM EST
    They see this as a game.  A chance to bring down the 'Captains and the Kings'

    Robinhood is on the Chopping Block... (none / 0) (#3)
    by ScottW714 on Tue Feb 02, 2021 at 09:01:36 AM EST
    ...because they are only allowing people to buy a single share of GameStop, yet you can sell as many as you want.  They are artificially putting barriers to the market and Congress is investigating because these artificial limits aren't applying to anyone else.  While I don't know if it's technically illegal, it sure as hell isn't right.  If you are going to allow people to buy and sell stocks, you shouldn't be able to dictate which ones.

    From what I understand, the run on GameStop has hedge fund managers furious because they all predicted it to plummet so they shorted the stock and lost billions and now they are putting the screws to day trading companies like Robinhood and they are acquiescing without a fight.  Cowards.

    Reddit users exposed how artificial the market really is and now the powers that be, hedge fund managers, have been exposed for the frauds they are.  They have been making billions for decade doing the exact same thing only a little more discrete.  The runs and falls are market wide rather than a handful of Reddit users, but the results are the same, the valuation of a company isn't dependent on it's actual value, but it's perceived value which in an open market can be easily manipulated.

    Now they have their sight set-on silver.  Why not, the doom & gloomers on the right have been pushing gold for years and it's at absurd prices, not sure why people care if others do the same with silver.  I think the idea of a bunch of guys in their parents basements making millions by manipulating markets on Reddit scares the F out of a lot of people.  That is not how wealth is suppose to work.  You need a fine education and put in your dues before you are allowed to manipulated stock prices for profits.  I mean before you are allowed to make grand profits in the market using your fine education and years of experience.

    As a side note, a local guy was on the news the other night, his Robinhood balance was just over a millions dollars and his investments was $2500.  But... he was bragging about how he's not cashing in because he knows it's going up more.  That is the problem with markets and why people shouldn't invest their own money, greed.  The guy has made 40,000% profit and it's not enough.

    Robinhood had to suspend trading because (none / 0) (#6)
    by vml68 on Tue Feb 02, 2021 at 01:27:40 PM EST
    because they are only allowing people to buy a single share of GameStop, yet you can sell as many as you want.  They are artificially putting barriers to the market and Congress is investigating because these artificial limits aren't applying to anyone else.

    they did not have the money to meet their regulatory capital requirements. The sudden increase in volume and volatility in Gamestop and other stocks that Wallstreetbets were targeting resulted in an exponential increase in capital requirements. After Robinhood shut down trading (buys) in those stocks, they were able to raise about a billion dollars in emergency capital which allowed them to open up limited buys in those stocks. They were then also able to also negotiate lower capital requirements which allowed them to increase the size of the still limited buys.


    I hope he cashed in because that (none / 0) (#7)
    by vml68 on Tue Feb 02, 2021 at 01:59:10 PM EST
    a local guy was on the news the other night, his Robinhood balance was just over a millions dollars and his investments was $2500.  But... he was bragging about how he's not cashing in because he knows it's going up more.

    "million dollars" is definitely not a million dollars anymore. Last I checked Gamestop was trading under a hundred from a high of $483 a few days ago.

    That is the problem with markets and why people shouldn't invest their own money, greed.

    Plenty of people trade/invest with their own money and are quite successful doing it.
    I used to trade stocks quite a bit before I switched over to trading options. Learnt quite a few lessons the hard way.
    My problem was I had a tendency to cash in my winners too early but not cut my losses on my losers early. I tended to just double down on a losing bet. I was on the wrong end of a short trade a few years ago. As the price kept moving against me, I just kept adding to my position rather than pulling the plug. I was so convinced about how this one particular company was extremely overvalued that I was like a dog with a bone. I finally called it quits when my losses were in the 6 figures. A week later the company cratered. I would have made a fortune, instead I lost a substantial amount.
    I learnt to never get married to a position. Emotions have no place in trading.


    Question... (none / 0) (#8)
    by kdog on Tue Feb 02, 2021 at 02:20:32 PM EST
    from a guy who only gambles on cards and horses if I may Auntie V.

    How is shorting a stock different than betting on (and then rooting for) some poor slob to lose their job?

    I get grimey with the best of them to make a buck in a sick sick world but that just seems like an unrighteous bridge to far. Or am I missing something about shorting?


    Hey Mr K, good to "see" you. (none / 0) (#9)
    by vml68 on Tue Feb 02, 2021 at 03:33:16 PM EST
    While I have been gambling on the stock market for many years, I still consider myself a rank amateur.

    I doubt I am going to do justice to my explanation of shorting a stock but here goes...
    Remember Blockbuster? They were everywhere and in the heyday of movie rentals, they were the place to go. So, let's assume that the company was doing well and their future looked bright and the market decided that taking that and other factors (company fundamentals, for example) into account the stock was worth $200 at that point in time

    Now, fast forward to a few years later and streaming is the new thing and you can watch your movies on Netflix, Amazon prime, etc. You realize that streaming is the future because you know that most anybody would rather sit at home and be able to pick a movie to watch rather than walk/drive down to the local Blockbuster to rent a movie that they hope there is an available copy of when they get there and then have to go back to return it on time or risk a fine. If you believe that streaming is going to take off, then you know that traffic at Blockbuster is going to suffer as a result. If Blockbuster starts losing business then all those investments they have made in brick and mortar stores start becoming mighty expensive and they start by laying of staff or closing underperforming stores. They are no longer worth $200/share or whatever they happen to be trading at.

    So, I don't really see it as me rooting for a business to fail and some poor slob to lose their job, if I short a stock. I see it as this company no longer has a viable business model and they are going under whether I short the stock or not. There is a new kid in town that is going to eat their lunch and assuming I figure that out early enough, I short the stock. So, in reality it is the consumers that decide whether a business is going to fail. I am merely gambling on what I think the consumers are going to do. If everyone decided that they still preferred renting movies from Blockbuster to streaming, I could short the stock all day long and all that would happen is that I would keep losing money!

    By the same token, when I invest (buy shares) in robotics, I am doing so because I believe that is the future. But, I also know that many of these companies are building robots that have and will take the place of many people doing repetitive minimum wage jobs.
    Now, I am going off on a tangent but a similar argument can be made about banning fracking or coal mining. People will lose jobs but the hope is that they can be trained in an industry that is more compatible with the future. There will always be people who don't have the education, means, will, etc., and I will leave it to others more knowledgeable to decide how to address that.

    Btw, I did not intend to write an essay but since you asked the question, this is now required reading for you ;-)!


    Thanks Professor... (none / 0) (#10)
    by kdog on Wed Feb 03, 2021 at 04:46:29 PM EST
    I kinda understood all that...I guess my thought is you can use the same analysis to gamble/invest in Netflix 15 years ago and still make money while (in theory) doing something positive, instead of straight up degenerate gambling on a Blockbuster short which is negative vibes and...I don't know, kinda dickish?

    When analyzing the racing form I can confidently predict a horse is a loser, but I can't bet on it to lose. I can only bet on a horse to Win, Place, Show. I like that gambling method better old friend (good to see you and the active crew too, plus Scott sweet!)


    Try Cr@ps (none / 0) (#11)
    by Chuck0 on Wed Feb 03, 2021 at 04:53:07 PM EST
    You can bet the Don't Pass or Lay a bet against a point. Betting the Don't is kind of like betting to lose. You're looking for that seven, whereas most folks are betting the Pass and don't want the dreaded seven.

    Maybe thats why... (none / 0) (#12)
    by kdog on Wed Feb 03, 2021 at 05:04:51 PM EST
    I could never get into craps.

    I have no idea what (none / 0) (#13)
    by leap on Wed Feb 03, 2021 at 07:08:47 PM EST
    those sentences mean... :(

    LOL. (none / 0) (#15)
    by Chuck0 on Wed Feb 03, 2021 at 10:07:27 PM EST
    Yes,craps has a language all its own. Used to spend hours at the tables. Had a 15 hour marathon at the old Sahara in LV a few years back. The crew I started with went home, slept, did family stuff, whatever. I was still at the table when they came back for their next shift.

    Don't play much anymore, can't stand at the table. And this past year not at all. I mostly play blackjack now. You get to sit. Made a couple forays out when PA & WV casinos first reopened in the summer. But when everything started spiking, I quit. Haven't been in a casino since about mid August 2020. I won't go until I can get vaccinated. And have no clue when that may be.


    I Could Argue... (none / 0) (#14)
    by ScottW714 on Wed Feb 03, 2021 at 08:09:59 PM EST
    ...that when you bet on a horse to win, your really betting on many other horses to lose. Same with a game, yeah you can call it betting on a team to win, but aren't you also betting on a team to lose ?.  Not the best analogy considering rarely is there not a spread, but you get the point.

    Options and Shorting is simply betting where you think the price of a stock will be at some point in the future, they all go up and down, so you pick when you think it will hit a certain point and you pay to place that bet.  If it hits, you cash in, if not, oh well that's the way it goes.

    If Elon Musk has a critical interview, you might believe he is going to do what he has done so many times, stick his foot in his mouth which in the short term will invariably make Tesla stock fall, but that doesn't mean you believe Tesla is going to fail or that you want them to fail, it means you understand that stocks go up and down and you might as well make a couple bucks trying to predict the future.  Just like horse racing.


    I don't know... (none / 0) (#16)
    by kdog on Thu Feb 04, 2021 at 05:37:02 AM EST
    The shorting, options, and other "unique" wagers they came up with (MBS anyone?) can have wide reaching implications that can hasten or even create an economic crisis that otherwise might not happen. Not to mention all the manipulation and angle-shooting they further enable.

    Donnie is out of his element but wouldn't a stock market that just lets you buy or sell stock, aka invest or divest, would make for healthier and more stable markets.  Instead of betting on numbers on a ticker. I mean jesus christ how many casino games do ya need? Call 800-GAMBLER you have a problem America!!!


    You do buy and sell stock when you short it (none / 0) (#17)
    by vml68 on Thu Feb 04, 2021 at 11:53:59 AM EST
    wouldn't a stock market that just lets you buy or sell stock, aka invest or divest, would make for healthier and more stable markets

    except in the case of a short you are selling first and then buying back later. Same trades, just in the opposite sequence.

    Options are a contract giving me the right to buy/sell an underlying asset (like a stock) for a particular price at a certain point in time. So, if I think Apple shares are going to be higher next month but I don't want to commit that much capital to buying the shares now, I buy options instead. If the price of Apple shares go higher than what I bought the option for, I can exercise the option and buy the shares for the lower price in my contract. Okay, there is more to it but this is just the basics. There is nothing nefarious about it.

    MBS (Mortgage backed securities) are financial instruments that you can trade like stocks, bonds, etc., so not equivalent to buying/selling/shorting/options.

    Btw, do you think it is wrong to short a company if you believe the company is indulging in some "creative accounting"?


    Selling something you don't have... (none / 0) (#18)
    by kdog on Fri Feb 05, 2021 at 05:43:48 AM EST
    is a concept so foreign to me, seems unnatural. At my job, if you want to sell something you need to make it or buy it first!

    There are lots of companies I fantasize about taking a sledgehammer too, sure. Not to make a buck, but to make a better world. I guess if you can do both at the same time that's ok.

    Short sell my health insurance company for me will ya? I type with a broken finger right now and I've been jumping through hoops for a week since I got the xray to get their blessing to see an orthropedic and still no luck. I hate them.


    Hey, dawg, our photo (none / 0) (#19)
    by oculus on Sat Feb 06, 2021 at 11:51:08 PM EST
    came up on Facebook this week. Those were the days.

    Your comparison to bookies (none / 0) (#4)
    by Chuck0 on Tue Feb 02, 2021 at 10:56:18 AM EST
    is correct. Bookies, even the current legal sports books, will bar certain kinds of betting or certain bets if they determine they can't cover. Or they have to find somewhere to lay the action. Happens all the time.

    I think that's the same thing that happened with Robinhood. They couldn't cover the action, so they had to stop the trading.

    I have an IRA and 401K. That's the limit to understanding investing in the stock market. However, I am a gambler. I get that part.

    Gamestop is in dangerr (none / 0) (#5)
    by itscookin on Tue Feb 02, 2021 at 12:27:30 PM EST
    of becoming a dinosaur in the gaming world. Much of gaming has been moved online. Add in the pandemic and the lockdowns, and the chain is in financial trouble. The hedgefund managers saw this as on opportunity to short the stock and pick the company's carcass clean. With the surge in its stock prices, the majority stockholders now have an opportunity to sell some of their own stock and get the liquidity needed to re-invert the stores' place in the gaming world. The hedgefund managers have been playing god with what companies succeed and which ones fail for awhile. This time they gambled and they lost. It was the scale of their loss that made it news.

    Post (none / 0) (#20)
    by CaptHowdy on Mon Feb 08, 2021 at 05:28:57 PM EST