Juggling Dynamite

Danielle was a guest with Jim Goddard on Talk Digital talking about recent developments in the world economy and markets.  Here is a direct video link.

Initial public offerings (IPOs) allow founders, early investors and investment bankers to capitalize on hype and cash-out by selling shares to the public.  Year to date, there have been $163 billion in IPOs in the US.  This surpasses the previous IPO record in 1999 (just before tech shares plunged 80% on average between 2000 and 2002).

In addition to selling shares to the public on newly listed companies, insider selling versus insider buying of shares at existing public companies reached a ratio of 58:1 last month.  Readings over 20:1 are considered a bearish sign indicating that corporate executives see cash as more valuable than their company shares.

Public appetite to buy companies at non-sensical valuations should cause pause for thinking people today.  For some sober assessment watch:  Doordash is the ‘most ridiculous of 2020 and holds no value’:  Analyst.

Selling customer order flow to predatory ‘high frequency’ traders should be illegal; instead, it has become a common, highly profitable practice among broker/dealers.  We become collectively weaker by helping financial predators to gorge on the ignorant and vulnerable.

Robinhood’s trading app designed to entice, addict and take advantage of the poor and unsophisticated is particularly egregious.  In the second quarter, high-frequency trading firms paid $180 million to buy Robinhood’s online trading customers’ order flow.  This was a 17% premium over the average paid to other firms for their customer order flow because Robinhood users are known to be ‘dumber’ and more profitable to front-run.

Read Matt Taibi’s expose Pandemic Villians:  Robinhood.  Here’s a taste:

The obvious problem is that a lot of these younger customers have no clue what they’re doing. “Retail investors don’t understand stocks, let alone options,” sighs Saluzzi. He compares the service to bringing amateur poker players to Vegas and seating them not at a table with old ladies and tourists, but with the best players in town. “It’s throwing them right in with the sharks,” he says.