What’s all the fuss about GameStop & Robinhood?

This is a tech story of stock market trading, capital markets, digital platforms and the power of social networks, with a dose of anarchy thrown in for good measure. Apparently there are 9 movies already lined up to tell this story.

But it is far from over…

ACT 1

It starts with GameStop, an unremarkable old world, bricks and mortar, video gaming retailer of little significance. That was until the 12th January.

In the following 3 weeks the stock skyrocketed to $480, before crashing back down! An unexpected rollercoaster ride for a stock that had flat-lined around $5 for all of 2020.

So, how could it happen?

It starts with Reddit and the subgroup r/WallStreetBets, an online forum of around 8 million users who share conspiracy theories and chatter on meme stocks. The lead character is a YouTuber called “Roaring Kitty”, who is, in fact, “not a cat”.

As GameStop chatter on Reddit gained momentum, the stock went viral, aided and abetted on TikTok.

ACT 2

Enter Robinhood, the controversial 6 year old digital trading platform that has gamified the highly risky business of options trading. They dominate this space with more active users than all the legacy platforms combined.

Their value prop is simple. “Free” trading to a user base that’s 80% male, aged 31, more likely to be a first time trader, and has a lower than average credit score.

Robinhood has made it easy to trade for a generation, new to the workings of capital markets. GameStop was the means for the little guy to earn the big bucks.

The Wall Street hedge funds entered stage left when they saw the “foolish” retail money chasing this overpriced stock. They shorted GameStop expecting the stock price to fall. But it didn’t.

As the hedge funds took a bath, what came next is called a “short squeeze”. This is where the short sellers cut their loses and start buying the stock they’d bet against. This pushes the price even higher! A “shoot myself in the foot” strategy.

ACT 3

On the 28th January, at the peak of the bull run and without notice or explanation, Robinhood suspended all trading on GameStop (and other meme stocks). This fuelled a flurry of conspiracy theories about hedge funds leaning on Robinhood. The real reason was less exciting and more technical to do with liquidity. (A16Z explain it very well here).

When Robinhood reopened trading, the damage was done. The stock was falling faster than a Mo Salah dive and Reddit traders lost millions.

Robinhood is now facing over 30 class-action lawsuits for blocking trading in GameStop. And it led to a congressional hearing last week that seemed more interested in procedure and posturing than actually getting to the heart of the matter.

ACT 4

The stock price settled down at around $40 for most of February, the excitement seemingly over…until it kicked off again this week with the CFO announcing he was stepping down.

On Wednesday the stock more than doubled to $91. Followed on Thursday (yesterday) hitting a peak of $183 before closing the day at $108.

How many more Acts are in this movie is anyone’s guess..but there’s more to come!

Moral of this story: 95% of day traders lose money. As Buffett says “it’s time in the market, not timing the market, that matters.”

Watch this video for a comprehensive explanation of how people with hedges run funds. 😹😹😹

Amazon has eyes in your home!

The new Echo Show 10 follows you around the room

This is the headline feature in the latest version of Amazon’s smart home device with a video screen. It swivels.

The AI tracking tech will position the screen to always face you, following you as you move about. To be clear, the AI is looking for the shape of a human. According to Amazon it doesn’t know you from Adam.

There is plenty of other smart tech in the new Show 10 too.

During a Zoom call the camera automatically pans and zooms so you’re always in the center of the screen. It can be used as a security camera when you’re out.

And it will entertain the kids for hours playing hide and seek while you put your feet up with a cold beer. (I made this one up 😊).

However, it doesn’t matter how much they dress this up, these are surveillance features and raise further questions of privacy and potential misuse (spying on the babysitter, checking up on your spouse, come to mind).

However, with over 100 million people owning an Alexa-enabled device and over 80% of US households having a Prime account, the concerns about Amazon “listening”, and now “watching”, don’t seem to have been a barrier to their expansion into the home.

Hey Alexa, get the door would you?

While you’re enjoying that cold beer and the kids are hiding behind the fridge, the doorbell rings. Who can that be?

Don’t worry, you won’t have to get up off your lazy backside and answer the door because Alexa will do it for you.

Amazon’s door technology Ring has some new features too. Alexa will find out who’s there, what they want, take a message or tell them to leave the delivery inside the back gate.

The 21st century doorbell is more than just a ding dong; it's a surveillance machine, keeping an eye on who is walking up your pathway, assessing their mood and intentions (good or bad) and even answering it for you.

Prediction: As more people shift to working from home, expect to see Amazon and Big Tech continue to innovate and move to dominate the home.

Related articles:

Is Alexa always listening? Readers Digest

Echo Show 10 review The Verge

Your Ring doorbell can have Alexa greet your visitors CNET

Americans and Privacy Pew Research

Crypto Corner

Is the Coinbase IPO about to give another rocket boost to Bitcoin’s price?

There's a sweet irony in the world's largest exchange of “unreal” money going public to raise “real” money. Did Satoshi Nakamoto envision his unregulated, decentralised unit of value being under the “control” of a centralised and regulated entity?

BTW, have you seen the theory that Elon Musk is actually Nakamoto?

Anyway, when it goes ahead, Coinbase is expected to go public through a direct listing at a valuation around $100bn.

This would make it the largest tech IPO since Facebook. It would also give crypto a legitimacy that will further fuel the demand for crypto assets and provide the "Netscape moment for crypto” (a reference to the 1995 IPO of the Internet browser that ushered in the modern web). Source: Axios.

Elon wants Mars to be run on Bitcoin

Since I just mentioned the most influential person in the world, Tesla recently made $1bn from its investment in Bitcoin. There’s no doubt that Tesla's January mass purchase of the crypto drove Bitcoin’s price up.

However, in so doing, the two largest narrative driven assets (Tesla and Bitcoin) are now joined at the hip. As one moves, so does the other.

When Coinbase IPOs, Bitcoin is expected to get another demand boost. If and when this happens, watch out for the correlation between Tesla and Bitcoin.

Elon might want Bitcoin to be used on Mars, but back on planet Earth the question is, will Bitcoin’s bull run end as a successful rocket launch, or destined to crash back down to earth?

Snippets of insight & info

“The rich invest in time, the poor invest in money.” Warren Buffett

Your Zoom background matters

According to this research into AI based personality assessments, it found that sitting in front of a bookcase, having good lighting and even the clothes you wear are all factors that influence how an individual is perceived on a video call. With over 90% of sales calls being made from home, salespeople take note! Source: BR24

WhatsApp’s new terms - agree, or be deleted

The flight to Signal and Telegram started when Facebook-owned WhatsApp gave its users an ultimatum. (Never a good sales strategy!) Agree to the new privacy policy or be deleted. The issue that these new terms give deeper and more granular access of user data to Facebook. In the week after the policy was first announced, Signal saw a 61 fold increase in downloads in just 1 week! Source: CXO Today (disclosure: I use Signal)

Samsung’s Augmented Reality glasses look great …from the inside out

They look ridiculous to me. But if you can see beyond the horrid design of these clunky prototype AR glasses from Samsung, this is a vision for the future of wearable computing. Controlled by your smart watch, these glasses project a giant virtual screen for watching movies, your laptop, 3D objects or taking a first person view from your drone camera. Watch the 2 videos in the source link to give you a taste of what’s to come. Source: TheVerge

Beware the “oil-rig worker”

The cost of romance scams in the US more than doubled last year to an estimated $300m. Scammers claiming to be “oil rig workers”, “in the military” or working as a “doctor overseas” set up fake profiles on Facebook, Instagram and across social media. This guide to Romance Scams show you ways to spot the scumbags. Source: FTC

Stuff that I’m Reading, Listening, Watching

Reading 📖

Earlier this week, Sir David Attenborough addressed the UN Security Council, and said “Climate change is the biggest threat to security that modern humans have ever faced”. In his new book, Bill Gates spells out the potential for new technologies to reverse the impact of climate change.

Listening 🔊

Who on earth came up with the idea of putting the former President of the United States and a rock icon together in a podcast? Well, whoever it was, it’s a gangster move and I love it. Renegades: Born in the USA is on Spotify and has Barack Obama and Bruce Springsten chat about music, family, values, life and a whole lot of other stuff.

Watching 👀

This Week in Sales is a must watch for salespeople. It’s super professionally made and the sales chatter between Victor and Antonio is entertaining and informative.

Another one for salespeople is Salespeople in Bars. A collection of lighthearted recordings of salespeople having a natter in a bar. If they’re shut where you are, IMissMyBar have recreated the sounds and atmosphere that you’re missing.

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