For media distribution : Markets Reach New Ethical LowsMy understanding of events is as below. Some details may be wrong, but this is what I have collected from various media stories. I welcome corrections but also vast distribution of this summary below, with the qualification that it is put forward as one private shareholder’s understanding to date of the events of last week regarding the details below. It seems a vast improvement on what I have seen in the media so far for the most part.
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Markets Reach New Ethical Lows Multiple North American stock brokerage firms undertook alleged criminal actions on Thursday, January 28
th , lead by RobinHood.com. These brokerages constrained private citizens to sale only of publicly traded stock of many companies, blocking the same clients from purchasing such stock, while allowing corporations to trade unhindered. This unprecedented bifurcated market remained as of market close on Friday. Citizens collectively lost enormous wealth to the benefit of corporations.
Affected stocks were: GameStop, AMC,
BlackBerry,
Bed Bath & Beyond,
Express,
Koss,
Naked Brand, and
Nokia.
Market regulators often place a halt on trading when unusual market volatility needs review, but it is unprecedented for a stock brokerage to limit a category of clients to only selling a stock while a privileged category of client remains able to both buy and sell.
To understand the significance of this, imagine if all private citizens owning a gold coin were prevented from buying more gold coins and that only corporations were allowed to buy gold coins. A glut of gold coins available for purchase by corporations would result, exacerbated by citizens trying to sell as fast as possible owing to the new uncertain market for coins. The corporations, being the sole remaining buyers, could acquire the coins at dramatically reduced prices. This is analogous to what occurred on Thursday and Friday with numerous brokerages in the North American stock market, with the minor difference on Friday that citizens were allowed to buy a single or very low number of coins while corporation’s buying abilities remained unhindered.
In this above example, the trust of citizens in the coin market would be broken. In reality, the trust of citizens in North American financial markets dropped to unforeseen depths on Thursday. Detrimental long-term economic implications will result. Unfortunately, the track record of government for the necessary swift and just enforcement action is exceptionally poor to date.
An important related note is that Google allegedly removed approximately 100,000 one star reviews given to Robinhood.com following its actions on Thursday.