Robinhood Exec Dumped AMC Right Before He Limited Trades, Lawsuit Alleges

October 8, 2021 tremendousblog Leave a comment

A new lawsuit in federal court in Florida alleges that a top Robinhood executive sold his stock shortly before he limited buying in shares of some meme stocks:

Robinhood Securities President and COO, James (Jim) Swartwout, who Tenev points to as making the ultimate call to PCO, says in an internal chat on January 26, 2021, “I sold my AMC today. FYI – tomorrow morning we are moving GME to 100% – so you are aware.”

When Robinhood froze buying in shares of stocks like AMC Entertainment Holdings, Inc. and GameStop Corp. in January, it caused large losses for many customers. With demand for the stocks artificially reduced, prices plummeted.

Angry as customers were then, I wonder how much angrier they’ll be to know that the top executives of Robinhood may have conspired together to save themselves before throwing their customers to the wolves.

If these allegations are proven, top Robinhood executives could be headed to prison. Such actions are illegal and totally unethical.

One thing I wonder is if Robinhood executives were dumb enough to put this in an online chat, how did they get their jobs in the first place?

There will be no blog next week. I’ll be on a trip to celebrate my grandmother’s 87th birthday!

In the mean time, enjoy a few of my favorite posts:

Why You Should Tell Your Boss You’re Not Coming in on Friday

The Swami Who Taught Me About Politics

How China’s Tech Industry Dies

What if Everyone on Earth Had Super Fast Internet for $1?

The Best Mexican Food Is In…New Jersey?

Photo: “pinnochio-01” by Chris_Short is licensed under CC BY-SA 2.0

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Business, Technology

Robinhood Knew Its Platform Was Falling Apart, But Kept Signing Up Record Numbers of Users

October 7, 2021 tremendousblog Leave a comment

On January 28, 2021, Robinhood cut off buying in shares of AMC Entertainment Holdings, Inc., GameStop Corp. and other popular stocks.

This caused the shares to fall, infuriating investors.

Just 3 days before, Robinhood CEO Vlad Tenev and top engineers knew the platform was under incredible stress. From an internal chat:

So, what did they do? Restrict new sign-ups? Pull some ads? No.

In fact, despite being well aware that its systems were buckling under enormous volume, Robinhood barrelled ahead to its biggest day for downloads ever.

That was January 27th. One day later, all hell broke loose.

This is but one gem from a class action lawsuit in the United States District Court for the Southern District of Florida.

As someone who invests in tech startups, I can certainly understand their desire to grow. But when your internal systems are so strained that you can barely service your existing customers, throwing gasoline on the fire isn’t the answer.

This behavior jeopardizes your reputation for the long term in order to reach a short-term goal.

Something tells me this won’t be the last lawsuit.

If Citadel is Trolling on Twitter, Where Else Are They?

October 6, 2021 tremendousblog Leave a comment

Some unusual online behavior from major broker Citadel Securities recently:

There are those who still refuse to believe an American landed on the moon.

Internet conspiracies and Twitter mobs try to ignore the facts, but the fact is that Citadel Securities was the pre-eminent market maker to the retail brokerage community in January 2021.
— Citadel Securities (@citsecurities) September 28, 2021

“Refuse to believe an American landed on the moon.” Does this sound like a normal PR department of a major company?

Not remotely. With the hyperbole and mudslinging, Citadel Securities sounds like an online troll.

The Financial Times notes that the firm has rarely said anything online. Indeed, its last tweet was from January.

This behavior strikes me as unhinged and speaks to dysfunction within the company. Why would the largest processor of stock trades in America get into online trashtalking?

If this slipped past management’s filter, I’m willing to bet a lot of other things have to.

And that’s where the lawsuit comes in. A suit in the US District Court for the Southern District of Florida alleges that Citadel pushed Robinhood to restrict trades in shares of AMC, GameStop and other meme stocks to benefit its associated hedge fund.

Both sides have already admitted meeting shortly before the restriction, but deny anything inappropriate happened.

Citadel seems to be getting desperate in fighting these allegations. And if they’re trolling on Twitter under their company account, I wonder where else they’re pushing their narrative.

I would not be surprised to see reports of Citadel employees pushing the company line under their personal accounts or pseudonyms. And with botnets available for just a few hundred dollars, why not?

Something has gone wrong inside this company.

It may take a federal court to sort it out.

How Tech Could Stop Wildfires

October 5, 2021 tremendousblog 1 Comment

The US West Coast wildfire season used to be 4 months long.

Now it’s 8, running from May to January. 2.5 million acres of land have burned in California alone this year.

But for desperate homeowners in fire prone regions, there may be hope. Several new technologies have been developed recently that may protect homes from these terrifying fires.

Long-Acting Chemical Sprays

Just today, the US Forest Service approved a new fire retardant chemical. It can be sprayed on houses and critical infrastructure and last for months.

It may even last an entire fire season.

The chemical is called PHOS-CHEK FORTIFY®. Developed by Perimeter Solutions in Missouri, it is the first fire retardant that can protect structures for the long term.

I could see every house in the West being coated in this material or something like it each spring.

Fire Blankets

Giant foil blankets have saved some homes from wildfires.

However, a study by Case Western Reserve University Prof. Fumiaki Takahashi found that fire blankets are usually only effective for short periods. In a prolonged fire, they may fail.

Dry Ice

An intriguing possibility I first heard about on a recent episode of This Week in Startups. The idea is that CO2 from the dry ice would suffocate the fire, which needs oxygen to burn.

Unfortunately, this approach does not seem very effective for forest fires. From a study presented at the International Symposium on Fire Investigation Science and Technology:

To be effective against class A fires, the solid state CO2 tends to need to be in direct contact with the fuel material. As many forest fires travel through the canopy, this is not a feasible extinguishment method.

Wrap Up

The best candidate looks like a long term fire retardant chemical. Coupled with advanced satellite imaging to track fires just seconds after they begin, it could be a powerful tool to stop these fires.

Best of luck to the innovative companies and researchers tackling this huge challenge!

Starting a Financial Plan from 0

October 4, 2021 tremendousblog 1 Comment

One of my oldest friends just got his dream job! He’s found fulfillment, accomplishment, and a lot more money.

But what should he do with it?

Matt* wanted to know how he could set himself up for a strong financial future, now that he’s finally making good money. I find a lot of friends and family in their 30’s asking me this question lately.

They come to me because I invest for a living and they want guidance. And I’m honored by that.

So I decided to sketch out a financial gameplan starting from zero, for them and for you.

Soon, you’ll be able to afford jewelry like Mr. T’s! 🙂

Step 1: Save 6 Month Emergency Fund

What if you lose your job or get sick? You don’t want to have to worry about being out on the street or unable to afford food.

And if you’re counting on unemployment, you’re putting yourself at serious risk. That check can take a very long time to come.

So I suggest saving six months of basic expenses in a high yield bank account (this is what I use). Basic expenses include rent or mortgage, utilities, and groceries.

You’ll get a little interest, but the real payoff is in financial security.

Why not just invest this money in the stock market? Because if the market drops by half all of a sudden, as happens from time to time, you won’t have six months of basic expenses anymore. You’ll only have three.

And that may not be enough.

Step 2: Pay Off Debt

It’s heretical to tell people not to pay off their debt first. But the reality is that lenders can often be stalled for a while. Your need to eat can’t.

Yes, your credit card or auto debt could accumulate for a bit while you save up your emergency fund. But it’s better than having an empty bank account if you lose your job.

I suggest keeping expenses down so you can save up that emergency fund and zap your debt ASAP. Once you have an emergency fund and no debt, you can relax a little.

When you’re ready to start paying off debt, choose the highest interest loans first.

If a loan has a lower interest rate than the stock market’s typical 10% return, it may make sense to invest instead of paying that loan off. This is often the case for mortgages.

Step 3: Start Investing

Yay! This is the fun part. This is when you go from just getting by to building wealth.

But investing is so confusing! Tons of companies, countless possibilities.

Here’s where to start: open a Vanguard account and just start buying the Vanguard Total Stock Market Index. On day 1, you’ll own almost 4,000 stocks.

And you’ll only pay 0.04% in management fees per year. On a $3000 account, that’s just $1.20.

Low fees are really important because high management fees can kill your returns.

I’ve used Vanguard for years and the service is outstanding. It forms a core part of my portfolio to this day.

To begin with, you’ll want to max out your 401k and IRA. Afterward, keep investing as much as you can!

It’s ambitious, but I suggest saving half your income if at all possible. It provides a wonderful cushion in tough times and can ultimately free you from working for others.

Step 4: Advanced Investing

You now own several thousand dollars worth of the Vanguard Total Stock Market Index. Congratulations, you capitalist fatcat!

Now, you may want to add other types of investments to your portfolio. Those could include international stocks and real estate, both of which Vanguard offers.

A portfolio with more diversification across parts of the world and asset classes (stocks vs. real estate, for example) tends to perform better over time.

Step 5: Ninja Level Investing

Once you’ve mastered the Vanguard game and built up a considerable balance, you may consider investing in private real estate (I use Fundrise) or tech startups.

These asset classes can provide higher returns, but they have a lot of risk. You often don’t get your money back for years, if ever.

If you’re just starting out, ninja level is a long way off. Crawl and walk before you try to run!

Wrap Up

I like seeing people take control of their lives and their money. That’s why I wrote this post.

If you follow this plan, you can go from an empty bank account and big credit card bills to a growing investment account paying you money.

You just have to take that first step!

Leave your questions in the comment section at the very bottom of the page!

FOMO: Investors’ Worst Enemy

October 1, 2021 tremendousblog 2 Comments

Markets are hot. The S&P 500 sits near record highs. Venture capital funding is higher than ever before.

As hot stocks rocket upward and the best venture deals move fast, a specter is haunting investors — the specter of FOMO.

Fear of missing out has investors piling into the stocks of fraudulent companies like Nikola before they miss the rally. FOMO has venture firms writing giant checks without even the most cursory due diligence, like seeing the books or talking to customers.

This fear is the worst enemy of investors. Because we’re afraid of missing the next hot company, we gradually compromise all our standards.

Well, the price isn’t that high. This deal is moving too fast to look at the books! Surely, if so many other big names want in on this opportunity, it must be legit.

But it’s during boom times like this that frauds can hide in plain sight. And their favorite tactic to reel in suckers is to make you afraid you’re going to miss out on the next big thing.

Adam Neumann at WeWork was a master of using FOMO to vacuum up capital without diligence or oversight. Many of those investors soon lost huge sums.

Elizabeth Holmes of Theranos got giant checks from investors without them ever looking too deeply into the technology. What if they had had a team of Ph.D’s look at the device? They would have probably realized it didn’t work and would’ve saved themselves hundreds of millions of dollars.

But they never did.

And why should they? Holmes was on the cover of Forbes, for heaven’s sake! It must be real, right?

Well, we know how that turned out. If we want to avoid investing in the next Theranos, WeWork or Nikola, we have to maintain our standards.

Find out revenues. See customer contracts. Evaluate the technology.

And we need to do more diligence in a hot market, not less.

It’s hard to defraud people in a bear market. In a down market, even good stocks find few buyers. Even the strongest startups struggle to raise money.

In a hot market, it’s much easier to conceal fraud beneath thick layers of hype with a yummy FOMO topping.

But think before you take a bite.

Tremendous

Monthly Archives: October 2021