This is what upsets me the most about what's been happening in recent days. There is now a popular narrative that the market is rigged against the little guy, but as a little guy who's been investing for about a decade now I know this couldn't be further from the truth.
The only reason this situation with GME happened is because no one person has power to control what investor decide to buy and sell (with this perhaps being one of the few exceptions I've ever come across). I don't really understand where this claim that retail investors can't take the opposite side of a hedgefund's trade is coming from. Hedgefunds that are over-levered go bankrupt all the time because retail investors along with professionals take the other side of the trade. It's worth remember a lot of hedge funds lost money shorting TSLA this last year too and that trade was largely retail driven.
I also think a lot of people are being really spiteful. I understand why hedgefunds get a bad rep, especially after all that happened during the GFC, but most hedgefunds are doing honest business. I don't really understand why Melvin Capital deserves to be put out of business and for their employees to lose their jobs because of what some other hedgefunds have done in the past.
Wait “most hedge funds are doing honest business”? Who are we talking about and what honest business is that? Front running trades while market-making, privatizing the profits and distributing the losses if they fail? Networking with other billionaires on insider information? They are parasitic opportunists.
You don't have to use a PFOF flow broker – in-fact I'd advise against it. But it's kind of a win-win. You get to make "free" trades and the market makers get to make a couple of cents. PFOF is what has enabled this boom in retail trading. The biggest benefices have arguably been retail traders.
Also not all hedge funds are market makers.
> privatizing the profits and distributing the losses if they fail
What are you referring to exactly? I never know what people are referring to when they say this because hedge funds don't generally get bailed out by the government, although they do get bailed out by other companies from time to time.
Perhaps you're referring to the banks that got bailed out during the GFC? Or hedge funds taking small business loans from the government in 2020? But in that case US citizens got bailed out last year too in the form of increased unemployment benefits, stimulus checks and mortgage forbearance.
But like I said, I don't really understand why people are blaming random hedgefunds for the role some hedgefunds played in the GFC.
> Networking with other billionaires on insider information?
Right, but this is illegal. There is regulation to prevent this. You're free to do this too if you're willing to risk getting caught. I see retail investors post about their inside trades all the time on Reddit.
The only reason this situation with GME happened is because no one person has power to control what investor decide to buy and sell (with this perhaps being one of the few exceptions I've ever come across). I don't really understand where this claim that retail investors can't take the opposite side of a hedgefund's trade is coming from. Hedgefunds that are over-levered go bankrupt all the time because retail investors along with professionals take the other side of the trade. It's worth remember a lot of hedge funds lost money shorting TSLA this last year too and that trade was largely retail driven.
I also think a lot of people are being really spiteful. I understand why hedgefunds get a bad rep, especially after all that happened during the GFC, but most hedgefunds are doing honest business. I don't really understand why Melvin Capital deserves to be put out of business and for their employees to lose their jobs because of what some other hedgefunds have done in the past.