Comments by "Laurence Fraser" (@laurencefraser) on "Valuetainment" channel.

  1. Turns out in this case they were lieing, but Not about why they stopped you from buying. When you buy, they have yo put up collateral until the purchase finishes going through a couple of days later. Normally this is only a couple of percent. But when a given stock's price is unstable, that required collateral can go up. In the case of GameStop, it went up to 100%. On what was now very expensive stock. That people were buying in huge quantities. This is actually a Protective measures to limit or prevent various disasterous failure states for the market and investors. Robinhood didn't have the cash to cover that much higher collateral in bulk. People were buying too much too quickly And the cost per transaction for the Broker was suddenly 25 to 100 times higher than normal. That's a liquidity issue, and one that's mostly not their fault. Thing is, liquidity is basically half of a broker's Job. Liquidity problems are basically death for them, as all the investors switch to someone else (and Robinhood had additional issues on this front too). So they lied about it,made up bullshit other reasons. The problem is, most people had no idea about the Actual reason, but knew the Excuses were bullshit. And Robinhood has certain business connections that could have (but, importantly, probably did not) result in a conflict of interest which might have incentivised acting to benefit the Hedge Funds, which was much easier to figure out than the actual problem... And if there's anything worse than a major liquidity problem for a broker, it's a reputation for screwing your investors like that. So their attempt to cover their arse blew up in their face. So, it's not that they were actively trying to screw over the investors, it's that a perfect storm of factors, mostly outside their control, meant they were Unable to support such trades... They then lied about that. Or, in summary: you probably can't sue them for complying with their legal obligations, and they're kind of stuffed anyway. Noticeably, Better Financed brokers did not run into this problem. (Note that the better financed ones are generally not free. These may be related.)
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  2. Most of the redit (&co.) guys are investing money they can afford to loose, in much smaller quantities per Individual, in a way that means they can't come out of it having lost any more than the amount they spent to start with (which, having spent it, they only sort of have until then anyway). They Consequently don't actually Care if they're left holding the bag at the end, so long as they take the hedge funds with them. Getting cash at the end is a bonus. (And if they Actually need money, they're getting out while they don't have to sell many shares to get lots of money). Seems relevant.
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  3. Shorting over 100% is easy: you short the stock, then the person you Sold to lends it to someone else to be shorted again before you buy it back. Or, if the situation's really crazy, they lend it to You again.
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