Thursday, December 17, 2020

2020: Gambling With Donny

In the era of McDonald Trump, being a total idiot has never been more aggrandizing - conferring presidential authority. However, that is about to change. Under his expert casino-bankrupting guidance the dumb money went ALL IN at the end of the cycle. In the American tradition...

One never knows true risk until they drink the Kool-Aid with the Jim Jones of presidents:

The Millennial trading platform "Robinhood" is in the news this week for charges that it has turned stock market trading into a game. As we all know, Wall Street doesn't like competition. I predict that the Robinhood platform will meltdown during this impending super crash, the majority of their gamblers will be wiped out, and the company will be sued out of existence within a year:

"The complaint cites Robinhood’s “aggressive tactics to attract inexperienced investors, its use of gamification strategies to manipulate customers, and its failure to prevent frequent outages and disruptions on its trading platform.”

The complaint is here. During 2020 through November their platform had 70 outages. Yes, you read that right. 

Robinhood is a private start-up company founded in 2013, that is part of the "new breed" of Fintech companies meant to disrupt the staid business of investing. Their platform targets newbie young investors with various incentives and a "zero fee" commission schedule. It was their zero commission structure that basically forced ALL of the major brokers to adopt zero cost gambling. There is only one problem - there is no such thing as zero cost. This week, the SEC charged Robinhood for misleading investors on this issue:

"Robinhood Financial has been fined $65 million for misleading its stock market customers about how the company makes its revenue from their trades

Robinhood made no mention of payment for order flow...While Robinhood markets its services as "commission free," the SEC claims that customers in reality received inferior trade prices that "in aggregate deprived customers of $34.1 million," despite any savings they received from paying zero in commissions."

The key point is that this new business model is now ubiquitous throughout the trading industry now that "free" commissions have been adopted by every retail broker. Here we see what happened to Nasdaq trading volumes in late 2019, when zero commissions came into effect:

"Robinhood joined the rest of brokerage industry by publishing monthly trading data on Monday. The start-up trounced them all"

“When we look at customer behavior over time, many Robinhood customers use a ‘buy and hold’ strategy,” a Robinhood spokesperson said:


Why am I going on about this?

This past week a young buck told me I'm too bearish and I don't know anything about markets. Unlike this individual, I've been through two bear markets (Dotcom, 2008), this punk has never seen a bear market in his life. 

Now, picture all risk asset classes correlated to the Robinhood platform and newbie investors who have now come to believe that all they have to do is scan headlines and throw their money at risk assets. Last week we saw spectacular blowoff volume in the IPO market. Early this week we saw blowoff top volume in the Biotech stocks with the vaccine release. And now we are seeing Bitcoin and everything else melting up into the stimulus passage. Now, everything is correlated due to over-leveraged newbie gamblers who will soon be trapped in their Robinhood iPhone game.

A taste of which we saw in February:

Feb. 28th, 2020:

"It is an odd moment for gold to be tumbling. One of the oldest and most-trusted safe havens in times of crises, gold typically rallies amid nasty stock sell-offs like the one that has gripped the world this week...Gold investors don’t want to sell but are forced to cover the losses in other asset classes."

There is only ONE stock broker platform that allows investors to buy Bitcoin directly. It happens to be Robinhood. We now have a situation in which global risk assets are massively correlated to over-leveraged Bitcoin gamblers, which is the third most crowded trade of 2020 after short dollar (2nd) and long Tech (1st).

Three years ago, Jimmy Altucher top ticked the Bitcoin market when he predicted Bitcoin going to $1 million by this year. It appears the Ponzi estimates have come in a bit this time around:

No question Bitcoin is the second biggest Ponzi scheme of our time, after the S&P 500.

All of which is what makes 2020, the year of gambling dangerously.

"Even if Congress gets its act together soon on a new stimulus bill — as is now expected following months of failed negotiations — it has already run out the clock, so much so that millions of unemployed workers will likely still be harmed. It turns out governance via extreme procrastination is not an ideal approach."

Only a super idiot would bet on a GOP bailout for the middle class. 

I am downgrading my market view to brick shitting clusterfuck. 

What I call a Brown Swan event.

One never knows true risk, until they gamble with the Jim Jones of presidents. Four years of non-stop lying is about to come to a biblical finale.