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Fidelity #1: GameStop Gets Stopped Out By Robinhood

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By Georgii Shipin @ Shutterstock.com

Robinhood made the grave mistake of cutting back trading yesterday. Why is this important? Because, for example, if someone places a market trade and the broker limits trading, your order might not be executed. You might even think you’re already out of the position but in reality you’re not because the platform limited trading.The next thing you know the stock has dropped by some crazy percentage and you’re still in it.

If you’re going to play with the big boys then get aligned with a big boy platform like Fidelity Investments. This is not a game. And it’s why Fidelity remains #1 in my book.

Annie Massa reports in Bloomberg:

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Extreme volatility in stocks such as GameStop Corp. and AMC Entertainment Holdings Inc. “generated substantial risk” for brokerages, imposing stricter requirements on the firms, according to Wall Street clearinghouse DTCC.

“When volatility increases, portfolio margin requirements increase too,” the Depositary Trust & Clearing Corp. said Thursday in an emailed statement.

Wild trading this week was driven by traders from a Reddit forum, who joined forces to drive up shares of several heavily shorted stocks, causing billions of dollars of losses for hedge funds.

Firms including Robinhood Markets, Morgan Stanley’s E*Trade and Interactive Brokers Group Inc. were among those to curtail trading in some of the Reddit-fueled names.

In a blog post, Robinhood linked its decision to impose the trading restrictions to the increased requirements from the clearinghouse.

“These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today,” Robinhood said.

Action Line: If you’re investing for retirement, take it seriously. It’s not a casino game, it’s your future, and the future of your family. Robinhood is not coming to save you if you lose it all.

P.S. Fox News’ Tucker Carlson talked to Barstool Sports’ founder Dave Portnoy about the GameStop situation. Here, Charles Creitz reports on the interview:

“I’ve been trading heavily since quarantine started and I was shocked by this,” Portnoy told “Tucker Carlson Tonight”. “I personally did invest in AMC and Nokia. Those are two of the stocks that the Reddit guys and the Wall Street Bets guys were pushing. I believed in the power of the Internet.”

“When I saw what Robinhood was doing — ironically Robin Hood [the app’s eponym] took from the rich and gave to the poor even though they do the exact opposite — I was stunned,” Portnoy added. “I think it’s criminal. I think there has to be an investigation. I think people have to go to jail.”

Portnoy noted that antiestablishment figures on the far right and far left have found common ground in condemning Robin Hood and the hedge funders seeking to ice out retail investors.

“Like, in 20 years of me doing Barstool, it’s the most shocked I’ve been … When you have AOC and Donald Trump Jr. both on the same side of an issue, you know something is dramatically wrong,” he said.

Earlier in the program, host Tucker Carlson said Robinhood bills itself as a progressive platform for day traders to get a piece of an otherwise elite market, while also supporting causes like the Black Lives Matter movement.

However, he and Portnoy noted that Robinhood makes its money not off retail investors, but by selling data gleaned from the retail investors’ behavior to the hedge funds that they appear to hold in contempt.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.
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