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It was obvious. I giggled when a journalist asked a Robinhood executive "how could you dare grey out the buy button, you re scamming investors", and he replied

by xwolfi 3y ago

It was obvious. I giggled when a journalist asked a Robinhood executive "how could you dare grey out the buy button, you re scamming investors", and he replied befuddled "how is it a scam to prevent them to buy at the peak of a bubble?". The disconnect between the short squeeze amateurs and the reality of any market was painful to witness, myself working at a large stock broker. Stocks are worth their dividend over time: stock with no dividend and with only a speculative future value are always a trap. It's ok to be conservative and expect a regular payment related to performance, it's very risky to speculate on other market participants' behavior: they have agency too, and sometimes are competent.

jahnu 3y ago
> stock with no dividend and with only a speculative future value are always a trap Berkshire Hathaway paid a dividend once. 50 years ago.
- pjc50 3y ago
  https://ycharts.com/companies/BRK.A/stock_buyback https://ycharts.com/companies/BRK.A/stock_buyback (buybacks are equivalent to dividends with a favourable tax treatment)
- onlyrealcuzzo 3y ago
  They do stock buybacks instead...
  - birdyrooster 3y ago
    And what their shareholders borrow against the value of their inflated shares and never have to pay income taxes? Seems almost like a national bust out based on the article definition.
    - boeingUH60 3y ago
      Only a minority of shareholders do this. Source: If a company's executive takes a loan against their shares, it's disclosed in SEC filings.
    - rvbissell 3y ago
      This bugbear has never made sense to me. Such a loan has to be paid back. With dollars. Presumably, from income that is taxed. And, with interest.
      - onlyrealcuzzo 3y ago
        No. It's taxed as capital gains. Dividends are income. You pay 50% less federal tax.
        rvbissell 3y ago
        Either I'm missing your point, or you are missing mine. Any loans that the ultra-rich take out against their assets to fund their lifestyle, are going to have an associated interest rate, and a payment schedule. If they don't want to default, they'll need another source of funds to make those payments. IF that source of funds for load servicing is a salary, they'll be paying income tax (income) + interest payments (loan). IF that source of funds is dividends, then they may be cap-gains or income, depending on qualification status. In either case: there is.. * A limit to how much can be borrowed, before the loan payments outstrip the loan-funding income or qualifying dividends * In the case of income, they are still generating an income tax liability to service that loan, and also paying interest on top of it. Paying 124K/year for 10 years to pay off $1M at 4.5% means they fell into the 24% bracket for 10 years ($297.6K tax total) , rather than 37% in 1 year ($370K tax total). So while it does appear to create a tax savings -- even with the 4.5% loan interest -- funding life with loans is not the absolute "never have to pay income taxes" that my PP described it as. Clarifications / corrections welcome.
        onlyrealcuzzo 3y ago
        You don't need to buy, borrow, die. A lot of people sell stock at capital gains, and get taxed at capital gains rates instead of income. You're making it more complicated than it is.
        rvbissell 3y ago
karamanolev 3y ago
> stock with no dividend and with only a speculative future value are always a trap The market in the last, what, 20 years, begs to disagree very hard.
- mschuster91 3y ago
  The market over the last 15 years has been artificially propped up by trillions of dollars worth of quantitative easing. A huge part of the "increases" in real estate and stock market values is backed by nothing more than fever dreams.
  - saiya-jin 3y ago
    And it created new inflated reality. That's what current baseline is and nobody ain't going back, money are simply worth less... I do expect this trend to continue on medium to large time scale
    - TheOtherHobbes 3y ago
      No, the inflation is definitely caused by worker wages. Absolutely it's worker wages. Not helicopter QE. Uh uh. That's just not how it works. Capisce?
      - itsoktocry 3y ago
        >Absolutely it's worker wages. Not helicopter QE. From a practical standpoint, there's little difference between these things. It's all more money in the pool. It's not like wages are tied to productivity.
  - ryukoposting 3y ago
    Unfortunately it's a fever dream that, as an individual, you have no choice but to buy into. In a world with 7% annual inflation, putting your money in a traditional savings account is tantamount to hiding it under your mattress.
MerelyMortal 3y ago
But they were allowed to sell, right? For someone to sell, someone else has to buy…
OsrsNeedsf2P 3y ago
> "how is it a scam to prevent them to buy at the peak of a bubble?" Of course it was the peak, you made it so most investors could no longer buy
- lotsofpulp 3y ago
  Robinhood is far from the only way to buy stock.
  - dirtwolf22 3y ago
    It was way more than just Robinhood. Any broker using Apex Clearing restricted buying as well https://i.imgur.com/SYrxbFW.png https://i.imgur.com/SYrxbFW.png
- MPSimmons 3y ago
  I personally find it hard to believe that most investors were using RH.

by xwolfi 3y ago

jahnu 3y ago

> stock with no dividend and with only a speculative future value are always a trap Berkshire Hathaway paid a dividend once. 50 years ago.

pjc50 3y ago
https://ycharts.com/companies/BRK.A/stock_buyback https://ycharts.com/companies/BRK.A/stock_buyback (buybacks are equivalent to dividends with a favourable tax treatment)
onlyrealcuzzo 3y ago
They do stock buybacks instead...
- birdyrooster 3y ago
  And what their shareholders borrow against the value of their inflated shares and never have to pay income taxes? Seems almost like a national bust out based on the article definition.
  - boeingUH60 3y ago
    Only a minority of shareholders do this. Source: If a company's executive takes a loan against their shares, it's disclosed in SEC filings.
  - rvbissell 3y ago
    This bugbear has never made sense to me. Such a loan has to be paid back. With dollars. Presumably, from income that is taxed. And, with interest.
    - onlyrealcuzzo 3y ago
      No. It's taxed as capital gains. Dividends are income. You pay 50% less federal tax.
      - rvbissell 3y ago
        Either I'm missing your point, or you are missing mine. Any loans that the ultra-rich take out against their assets to fund their lifestyle, are going to have an associated interest rate, and a payment schedule. If they don't want to default, they'll need another source of funds to make those payments. IF that source of funds for load servicing is a salary, they'll be paying income tax (income) + interest payments (loan). IF that source of funds is dividends, then they may be cap-gains or income, depending on qualification status. In either case: there is.. * A limit to how much can be borrowed, before the loan payments outstrip the loan-funding income or qualifying dividends * In the case of income, they are still generating an income tax liability to service that loan, and also paying interest on top of it. Paying 124K/year for 10 years to pay off $1M at 4.5% means they fell into the 24% bracket for 10 years ($297.6K tax total) , rather than 37% in 1 year ($370K tax total). So while it does appear to create a tax savings -- even with the 4.5% loan interest -- funding life with loans is not the absolute "never have to pay income taxes" that my PP described it as. Clarifications / corrections welcome.
        onlyrealcuzzo 3y ago
        You don't need to buy, borrow, die. A lot of people sell stock at capital gains, and get taxed at capital gains rates instead of income. You're making it more complicated than it is.
        rvbissell 3y ago

karamanolev 3y ago

> stock with no dividend and with only a speculative future value are always a trap The market in the last, what, 20 years, begs to disagree very hard.

mschuster91 3y ago
The market over the last 15 years has been artificially propped up by trillions of dollars worth of quantitative easing. A huge part of the "increases" in real estate and stock market values is backed by nothing more than fever dreams.
- saiya-jin 3y ago
  And it created new inflated reality. That's what current baseline is and nobody ain't going back, money are simply worth less... I do expect this trend to continue on medium to large time scale
  - TheOtherHobbes 3y ago
    No, the inflation is definitely caused by worker wages. Absolutely it's worker wages. Not helicopter QE. Uh uh. That's just not how it works. Capisce?
    - itsoktocry 3y ago
      >Absolutely it's worker wages. Not helicopter QE. From a practical standpoint, there's little difference between these things. It's all more money in the pool. It's not like wages are tied to productivity.
- ryukoposting 3y ago
  Unfortunately it's a fever dream that, as an individual, you have no choice but to buy into. In a world with 7% annual inflation, putting your money in a traditional savings account is tantamount to hiding it under your mattress.

MerelyMortal 3y ago

But they were allowed to sell, right? For someone to sell, someone else has to buy…

OsrsNeedsf2P 3y ago

> "how is it a scam to prevent them to buy at the peak of a bubble?" Of course it was the peak, you made it so most investors could no longer buy

lotsofpulp 3y ago
Robinhood is far from the only way to buy stock.
- dirtwolf22 3y ago
  It was way more than just Robinhood. Any broker using Apex Clearing restricted buying as well https://i.imgur.com/SYrxbFW.png https://i.imgur.com/SYrxbFW.png
MPSimmons 3y ago
I personally find it hard to believe that most investors were using RH.