Is Infinite Leverage Within Your Personal Risk Tolerance?

Is Infinite Leverage Within Your Personal Risk Tolerance?

Robinhood traders recently discovered a glitch that allows them to gain “infinite leverage.” The ballsy traders found a way to purchase millions of dollars worth of stock on margin. They of course then showed off their trades on the wallstreetbets subreddit. The first known user to do so said he was trading within his “personal risk tolerance.” One trader gained a million-dollar position with only a $4k deposit. 

A somewhat late response regarding the situation came from Robinhood on Thursday afternoon. The company tweeted, “We recently identified and restricted a small number of accounts engaging in problematic trading activity. We’ve made a permanent update to our systems intended to prevent this pattern.” You can read the full tweet here

The legality of this situation is creating a hot debate on who will be held accountable. But it’s not a debate that trading on that much leverage is a whole new level of dumb. The CEO of Ritholtz Josh Brown said “The Redditors who made millions on a Robinhood glitch are ‘psychopaths.’ It’s been a hilarious and a bit scary to watch it all unfold.

Research says the 2017 Bitcoin Rally Was Manipulation

Professor John Griffin from the University of Texas released a study last year that the 2017 bitcoin rally was due to manipulation. He is now claiming that a single market whale was behind the whole thing.

John and graduate student Amin Shams hypothesis is that about half of bitcoin’s 2017 gains were a result of planned price manipulation using the cryptocurrency called tether. The research implies tether was used to purchase bitcoin to keep it from declining. 

The study doesn’t uncover who the whale is but they believe it is one massive account at Bitfinex. The cryptocurrency exchange Bitfinex is owned by the same people that own tether. They are currently being investigated for fraud by the Department of Justice. 

The U.S. Won’t Reveal How It’s Using Facial Recognition Technology

The U.S. government denied the ACLU’s request for information regarding how they use the technology and how they plan to use it in the future. The ACLU filed a lawsuit against the FBI, DEA and DOJ to get an explanation on how the government is using facial recognition technology. 

Currently half of U.S. citizens are in facial recognition databases. 

Last year Amazon was under scrutiny for selling facial recognition technology to law enforcement. No one really knows how the government and law enforcement are using the technology. With so many apps using facial recognition, it’s not hard to imagine they have a full scan of just about everyone’s face. It’s being used in China to reinforce its authoritative system and punish those who misbehave. 

Earlier this year San Francisco banned the use of facial recognition software by police and other groups. While the technology has good uses, it will most likely become an invasion of privacy by dystopian governments. 

Record Highs

The Dow and S&P 500 closed at record highs on Thursday. Many reports and tweets about the “Phase One” trade deal with China helped propel the market higher. Some reports suggested the White House’s plan to roll back some tariffs reached some internal conflict. The market went flat today after Trump said he has not agreed to rollbacks of U.S. tariffs on China. 

Wall Street Weekly Performance

S&P 500 $SPY +0.82%. 
NASDAQ $QQQ +1.07%
Emerging Markets $EEM +1.05%
$VXX -1.08%
$GLD -0.83%
$BTC -4.30%
Long Term Treasuries $TLT -4.02%

This Week’s Top Gainers

Nextcure Inc $NXTC +192.50%
Constellation Pharmaceuticals $CNST +114.01%
Fulgent Genetics $FLGT +70.70%

This Week’s Top Losers 

Anaptysbio $ANAB -73.10%
Allena Pharmaceuticals $ALBA -63.34%
Obseva Sa $OBSV -61.86%

MEME of the Week

What Else Is Happening

  • Disney reported an earnings beat on Thursday lifting the stock over 5%. Revenue from parks and products rose 8%. The Disney+ streaming service is set to launch November 12. 
  • Japan makes plans for an economic stimulus package to help accelerate the economy. The BOJ has already cut interest rates to -0.1% and purchased tons of government bonds. However, now that the yield curve is flat banks are having a hard time turning a profit.
  • The European Union trims growth forecasts. “I urge all EU countries with high levels of public debt to pursue prudent fiscal policies and put their debt levels on a downward path,” said Valdis Dombrovskis, the EU vice-president in charge of financial stability.
  • China is placing curfew on online gaming. The country fears its youth is getting addicted to video games and the curfew is aimed to prevent it.  
  • Cannabis company Canopy growth partners with another celebrity, this time its Drake. They plan to form a cannabis wellness company together. Drake will own 60% of the company while Canopy Growth will own the other 40%. 
  • Xerox offers to by HP for $22 a share. Xerox spokeswoman Caroline Gransee-Linsey, confirmed the takeover bid and provided the following statement: “Our industry is long overdue for consolidation, and those who move first will have a distinct advantage. We look forward to expeditiously moving this process forward and creating additional value for shareholders.”
  • Bank of America plans to increase minimum wage for all employees to $20 per hour a year ahead of schedule.
  • Former McDonalds CEO Steve Easterbrook was fired last weekend for having a “consensual relationship” with another employee. It’s estimated he will receive around $70 million worth of stock and options in compensation for his forced leave. 
  • Federal authorities are investigating Under Armor for fraudulent accounting practices. 
  • The Security and Exchange propose rules that favor corporations and could limit shareholder voices.