I can't believe how many took a margin call as some nefarious conspiracy. Kyle Kulinski, just as an example, said that Robinhood was given a billion dollars by hedge funds to disallow transactions of GameStop. https://twitter.com/KyleKulinski/status/1355573696119889921
>I can't believe how many took a margin call as some nefarious conspiracy
Why? We have the intersection of 3 things:
1. A financial system with opaque and often counter-intuitive inner workings (from an outsider's perspective)
2. A history of financial firms "innovating" (sometimes outright fraud, sometimes legal but leading to new legislation to restrict the "innovation"). Also the industry is not exactly known for being guided by strong moral principles.
3. A lot of money at stake.
If this is not a perfect breeding ground for conspiracy theories, I don't know what is!
I think the problem isn't necessarily how people immediately believed the conspiracies at face value (although that's still kind of bad), it's that
1. almost a week later, there are still people in certain communities (eg. wsb) that still believe in the conspiracy, and haven't bothered to inform themselves of at least the counter-arguments (eg. DTCC deposit requirements).
2. prominent politicians decide to jump in themselves without doing due diligence on their part, for some cheap political points.
> 2. prominent politicians decide to jump in themselves without doing due diligence on their part, for some cheap political points.
Erm, the politicians who jumped in (Cruz and AOC) kind of do this crap all the time. Its no surprise to me. No different than Cruz jumping in to the "stolen election" crap a few weeks ago.
That's the thing about "Populism" today. Its about following and agreeing with meme arguments without having any deeper analysis. I think its fine when the memes are stupid / joke level (ex: Bernies mittens is kinda funny). But even in joke/stupidity levels (ex: Bernie's mittens), there's a level of conspiracy and unreasoned / counterfactual / direct lies that aim to shift public opinion. (On the right: Bernie's mittens represent how the pandemic has closed shops, believe it or not. Which is why the right is willing to meme the Bernie's mittens, corrupting the left's interpretation of the image)
Its how things operate in today's political atmosphere. I can only hope that we Americans grow up and learn to see how stupid this strategy is eventually. Welcome to meme warfare. (At least in my social circles, the Bernie mittens meme seems to be leaning towards the left-interpretation of the story. But there's constant meme warfare to change the meaning of these images).
I often think of political spin. Great politicians don't need to lie or even to misrepresent facts. They just have to present actual facts that highlight some narrative.
It seems to be a fact that limiting or preventing buy orders would benefit hedge funds. So we can spin the fact that they prevented buy orders because it benefited hedge funds.
Another fact seems to be that Robinhood needed to cover its margins and required capital to do so. So the new spin is that Robinhood prevented orders because it needed to cover margins.
There is no real truth anywhere, just competing narratives. Slowly the prevailing narrative is changing from the first to the second. Some people are choosing one story over the other as the Truth. There is no doubt some actual paid PR going into both stories. My own opinion is that in cases as complex as this, there is no real Truth that fits any promoted narrative.
These narratives don't even appear to be mutually exclusive. Both can be true. Neither can be true. Several other unstated narratives can also be true. I think it's a common fault to believe only one thing can be true, when there are clearly many possibilities. I don't think it's exactly a false choice, but I'm sure there's a name for it.
It just bugs me when people don't consider that, and it's hard to tell if they're speaking in bad faith, have poor logical deduction skills or something else.
> I don't think it's exactly a false choice, but I'm sure there's a name for it.
It's a false dichotomy [1] and that is exactly how these narratives are spun. Another technique isn't forwarding your own narrative, but belittling the opposing narrative. "Only a fool could possibly believe A when it is possible that B is the reason". They don't even have to say that B is the reason, just suggest that it is a possible reason and believing anything else is foolish.
We're seeing exactly that. People are too stupid/ignorant to understand how complex this subject is, so they should just shut up and trust us when we say B is the reason. Do you even know how B works? Clearly you don't. If you did you would understand your own foolishness in even considering that A factored into any decision related to this subject. You idiot. Maybe you're a conspiracy theorist!
It's a silly theory, but I wouldn't say I'm surprised, because the entire idea just doesn't make a ton of sense from first principles. If the NYSE has some stocks for sale, and I have money to spend on those stocks, why is it more complicated than buying a water bottle off Amazon or a Netflix subscription? There are good answers, sure, but they're long and complicated and it's entirely fair to be suspicious when you first hear them.
I think this is really under-appreciated as an argument in favor of lower settlement times. There's a lot of indirect societal costs in having the financial system look so strange.
Since neither Amazon or Netflix allow you to pay cash, the transaction settles much later. You get the appearance of immediate settlement, not unlike the stock market in normal conditions.
I'd assume if one were to check out from Amazon with say several millions of dollars of goods, there would be some phone calls being done in the back offices.
why is it more complicated than buying a water bottle off Amazon or a Netflix subscription?
It's not. This is one of those "tell me what happens when you navigate to a URL" interview questions. What really happens when you order something off Amazon? Is there a float? Is there delayed settlement? Does Amazon at some point have to settle with another party? And the answer to all of those questions is "yes". We could continue to deconstruct your analogy, but I think the point is made.
Sibling comment made an analogy to buying a car. I believe if one really tore into the question, one might find that just about the only financial transaction that doesn't work with many similarities to the stock market is handing a fiver to the clerk at your local convenience store. (And someone that knows more about retail than I do can tell me how wrong I am about that.)
You're very much on the point, I'd just add that a fiver in a cash register is both an asset and a liability, as anyone with a gun-like object might come through the door and take it. It's only when that fiver, together with the rest of cash, is taken at the end of the day to the bank and deposited there that your $5 grocery transaction can finally be considered settled.
> water bottle off Amazon or a Netflix subscription
The first is a trivial item, the second an item of zero marginal cost that doesn't matter if payment fails.
A better example is settlement time of a car or house. If you buy a car maybe you can drive away today, but it takes a while before your ownership is fully registered.
I once bought a car, but did not have a check for the deposit on me. They let me drive off the lot with the car and I dropped off the check the next day so this is a pretty decent analogy. If for some reason I was unable to deliver the check I would be returning the car to them at a reduced value.
Why? We have the intersection of 3 things:
1. A financial system with opaque and often counter-intuitive inner workings (from an outsider's perspective)
2. A history of financial firms "innovating" (sometimes outright fraud, sometimes legal but leading to new legislation to restrict the "innovation"). Also the industry is not exactly known for being guided by strong moral principles.
3. A lot of money at stake.
If this is not a perfect breeding ground for conspiracy theories, I don't know what is!