Animal Spirits Podcast - Emergency Pod: We Were Both Wrong About Robinhood

Episode Date: August 5, 2021

On Wednesday, we held a Twitter Spaces to discuss the Robinhood IPO and the fact that Ben sold his shares last week.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions and the securities discussed in this podcast. Ben and I record a Spaces, which is on Twitter every Wednesday at 4. But for this week, we did an emergency one to give an update on all of our

terrible calls on Robin Hood, which is up 32% right now. It is Wednesday at noon. So we wanted to record this one, make it available on the podcast. But again, if you want to hang out with us on Wednesday afternoon. We usually go live at 4. So thank you for listening. Hope everybody has a great weekend. All right. Speaking of marking it down, you mark something down, Ben. And this probably didn't age well. Nothing age as well anymore. We've said that forever. Remember when I said, not only are you wrong, Ben, you're so wrong. You took a lot of joy in this. You took so much joy. I did. I really did. I mean, here's the thing. We both look like idiots for Robin Hood. And we're going to get into the reasons why, but the big winner here is content.

It's the gift that keeps on giving. I don't even care that I missed out on all these huge gains in the meme stock. So, all right, let's go back. That's a good. That's a good point. Robin Hood has given us more content over the last year than just about anything. Oh yeah. We talk about Robin Hood all the time.

And I have a big time love, hate relationship with them. But I'm the guy on, what's the movie? The giff of the guy, no regrets, where he spells no regrets wrong on his tattoo. And I am, no regret. And I am Kemba turning around after I thought my three was in. Okay, so we've talked about Robin Hood through all their travils. They had the stuff where they shut down and they stopped the meme stocks. And I've been saying for a while, finally I jumped on the boat probably six months ago.

And I said Robin Hood is going to be huge. When they have an IPO, they are going to be bigger than Coinbase. And you claim I slapped the table. I don't know if that actually happened. You said I was putting the table. I mean, maybe it was a metaphorical pound of the table. I was in New York City. We taped the Compound in Fred's podcast. Thursday. It was the day that Robin Hood started pricing and trading. You could not wait.

You had a smile on your face all day because you could not wait to throw it in my face. I think you were being kind of coy about it before it happened. You weren't even talking about it very much. You were just, you were waiting to throw it my face, which, you know, that's fine. I would have done the same to you. So I felt no ill will there. I would have totally done the same thing to you. So what was your call? What was it? Hold on. Let's just set. the table. What was your exact call six months ago? My exact call was when Robin Hood IPOs, they're going to be bigger than Coinbase. I said, that was the call. Correct. I said, Robin Hood is going to be bigger than Coinbase. So I was not wrong just four days early. But I also

said, okay, I bought Robin Hood shares on the Robin Hood platform. I got into the IPO access. They filled me at $38 on the low end. Not to brag. Gosh. Yeah. And I, well, I, it's definitely not to brag at this point. I'm the opposite of bragging. I said to you and Josh, what do I do here? I bought this hoping for an initial 30-day pop on the first day. It didn't happen. I'm guessing it didn't happen because all the VCs sold who had bought in at whatever and they locked their gains. Big kudos to Big Howie Linson. Not only did he buy at like a $20 million valuation. He bought at a $30 billion valuation. So kudos to him. He bought shares, I think, at the IPO. Yeah, I'm going to have to mute him today because he keeps talking about.

it and rubbing everyone's face, but kudos to him. So I said, okay, I didn't get my pop. The VCs sold. Who knows? You know what? I didn't plan on buying and holding around. But I'm a buy and hold investor, right? I don't, I don't really buy and sell stuff very often. I, I'm like all Robin Hood, like all Robin Hood users. Yeah, like all. Robin Hood is buying, all buy and hold investors. No one trades on there. So I sold it the very next day. I lost seven or eight percent. I said, all right. Watch my hands of it. Um, wait, hang on, hang on, hang on. Hang on. You said, you said, what would you guys do if you were me? Josh said I would hold.

And I said, I had dump it. So, so I was pretty, I mean, I literally told you to sell at the bottom. So I've got some, I've got some egg in my head. I sold. I sold as close to the bottom as possible. I probably sold at $36, something. I bought it at $38. Yes, you said next, by the way, I'm not taking any stock advice from you anymore. I'm listening to Josh from now on.

Did you see the email that we got about the guy that put his twin daughters through Michigan State by buying? Yes. He said, me buying. It was a buy signal. Which, yeah. So, so I sold the next day and then fast forward to tomorrow, Robin Hood pops big time. Here's the thing, though. So Robin Hood is up 40 or 50% today.

I don't know where it is at the moment. It's actually, it's actually in a bare market. Its first bare market is 23% off its size. Okay. But it, so here's the thing. So Robin Hood was up, what, 15% yesterday, something like that, 20%. This is why I don't have any huge regrets about this. I was pounding the table on this.

And they almost caught Coinbase yesterday. If I would have still held it from last week, I would have totally sold yesterday when they had popped double digits. Right. So I don't have the personality to hold a meme stock. That's just, that's not me. I'm never going to have that personality. So maybe, so I honestly, there's certain investments that I'm sure that I've sold over the years that I go, oh, why did I do that? This is not one of those.

I actually don't feel a lot of regrets for this. No, of course you should. This is, this is for the lulls. But yesterday, if you did sell it yesterday at 46 bucks, you would have made $800. which is cool, but would that have changed your life? Yeah, and today it's up 32% now. Yeah, that would be great. I would be taking tons of victory laps and stomping all over you on social media.

But even if you saw, Ben, even if you, this is way better though. Even if I was right and wrong. Even if you took the W and you sold it yesterday and you came out 20%, you'd still be getting dunked on from missing the 50% pop the next day. And by the way, how the hell is this happening? I guess it should have been obvious that Robin was going to be meme stock. I was also wrong because I spoke two or three months ago to Crystal Kim, and I said, I really don't say it. I don't understand why Robin Hood users will support the stock.

It's like, and I use Twitter as an analogy, maybe a bad one. Twitter, people on Twitter hate Twitter. No, so why would, why would Robitud users have any loyalty to the product? I saw the number was over 300,000 people on Robin Hood got filled with shares. That's a pretty big number. Wait, what was the number? 300,000 what users? 300,000 users put in for the IPO shares and got filled.

So obviously, I'm paper hands and their diamond hands. How many users do they have? Well, it's 18 million accounts, aren't there? All right. So, I mean, that's, that's, that's, that's nothing. I don't know. I still think that's pretty, that still seems pretty large in the grand scheme of things. Let me do some arithmetic.

300,000 individual users? That's one and a half percent of all users. Okay. Don't you think they're thrilled with that, though? I don't think this is a Reddit thing. I think this, I think that first day was kind of a mirage because it was, like I said, all VCs just selling. And then it pops and, man, I don't know. I think that this, the story is kind of perfect, though, right?

Well, we don't, I mean, I don't know if these are selling. What about lockup? But I don't, so, so right now it's $52 billion for Robin Hood, $49 for Coinbase as far as market gaps. Here's the thing, though. I think the meme stock stuff, it, it's hard to like, do. of victory dance and celebration when it happens like this so fast for a for a meme stock thing. Like this doesn't, this doesn't feel to me like an IPO bounce. This feels like a meme stock bounce. I don't know. I'm saying this you get like, I can like 75% of the way pet

mess up in the back for this. Now you're feeling the market. Your feels? No, no, I'm saying I'm trying to give you a little more credit saying that like it takes a little bit of a shine off of it because it was a meme stock thing and not just like that first day bounce. Um, okay. No, fair point. So, but GameStop is, is, is, is, looks like shit. And AMC is breaking down heavy right now. Amstey looks like garbage. So do you, so you think some of that money may have gone from those into something like this. You know, that's interesting to say, when we say money goes, what do we like, what do we really mean? Like, is money literally going from this stock into that stock? Is that how it works? I guess let's say, so for me, this was all fun money. I, it's not like I

was taking this in my 401k or IRA or whatever and betting it all in Robin Hood. I have this fun portfolio in Robin Hood where I pick stocks and pick ETFs and do stuff I wouldn't normally do elsewhere. Do you think people have a set amount in their Robin Hood account where they're just kind of having fun? And they say, okay, I had my fun in GameStop. Now I'm going to Robin Hood. And that's where the shifting comes in where they only have enough attention span or portfolio to make a crazy move with that one little piece of their portfolio. Because again, remember, it's $4,000 average account size for Robin Hood. Not a lot of money.

I think there's a lot of different groups on Robin Hood. I don't think we could talk about them as one mob of people. There's to your point, 18 million users, a lot of different motivations, different timelines, different account sizes, goals, etc. Yeah, but I'm guessing two-thirds of them have a similar motivation. Yeah, I would say that's fair. It's like a, it's a pretty big number. I'm just, to your point, about are the Robin Hood users going to actually bet on, because how many Robin Hood users complain about the functionality? Maybe this is just us being blind.

The functionality, I love the functionality. Isn't that the whole point of the app? No, I mean, I'm saying complaining about like the service going down. Robin Hood users have been big complainers, like the Twitter thing you said. You know why else you're a loser in all this that we haven't mentioned? You can't flip IPOs anymore. You're a flipper. They have identified you as persona non grata. You bought the shares.

you dumped them. You had a warning. They warned you and you said, it's okay. And now you can't trade IPOs for 30 days. In 53 days, I can start flipping IPOs. Oh, 53 days? Well, no, it's been a week. Oh, 60 days. It was 60 days. Honestly, how many IPOs come out every 60 days? Is that really going to deter people from doing this in the future? What if we get a, what's the next big one? What's the next big one to drop? I don't know, but I don't see this being a big deterrent. 60, Like, if it said a year, that's a big deterrent. 60 days, that's a slap on the wrist. What if we get a block-fi IPO in the next 60 days?

You can't participate. On Robin Hood, I can't. I can participate elsewhere, maybe. True. So-fi? But do you really, so 25% or so of the shares went to Robin Hood users? No, no, no, no. Hold on, hold on.

Is that a fact or is that what they potentially were allocating up to? The Wall Street Journal said 20 to 25% is what it came out to. Oh, really? But let's say a company like BlockFi does go public. Is Robin Hood really going to get that many shares? What are they going to get 1% of BlockFi? They're not going to get a ton of them. This was a one-time situation.

Honestly, that's the only reason I did it because I can't see myself doing this again. Listen, the only reason why you did it, let's be clear, you were going to pull out. And I said, Ben, do it for the content. And I did it for the content. And it worked beautifully, right? Chef's kiss. We're all winners here. And losers.

And losers. For me for yourself. I'm bald. I said my kids aren't going to go to college anymore. And a bunch of people sent me a message saying, hey, Ben, the 529's back. And I said, actually, I was getting a lot of congratulations on Twitter the last two days people saying, way to go, Ben. And no, no, I'm the gif of the guy being carried out in the coffin with the guys dancing below.

That's me right now. I think that's a probably good place to wrap. You got anything else? Totally worth it. No, I will just say, this is my first and last IP. That's it. I'm done. I'm out. I don't believe that for a second. By the way, speaking of, I'm going to, I'm going to Mohican Sun this weekend. So I'll have some stories for the show next week.

Okay. How much, what's your fun money you're going to bring to lose? And how many times you're going to go back to the ATM after that, after you lose it? I'm not going to go back to the ATM guy. I come, I come with my stack. Probably, I don't know. What's reasonable? $1,500. Do you know what the point you need to get up and leave is when you start playing two hands at once. That's the point where... That's like using leverage on Robin Hood. I always do two hands at once.

Matter of fact, I'm going to go early in the morning, relatively early. I want a full day there. Might play some poker. I usually don't play poker because I've never been in a casino alone. I feel like there's a very antisocial thing to do. So I might have the poker room first.

But yeah, I'm a two-hand guy. Sometimes three, if they'll let me. So you're using maximum leverage then. 100 to 1. Here's the other problem. This is how casinos have turned into Robin Hood and not the other way around. They now have these automatic shufflers at all the tables.

So you never get that break to, like, grab a drink, assess the situation, see how badly you're losing, do the magical cut card where, you know, you cut it and give yourself some good luck. This is interesting. They just automatic shuffle. That's the ones that I've been to. This is interesting. The casino has turned into Robin Hood? Yes.

That's a take. Right? Casinos are borrowing from Robin Hood. They don't let you out. All right. I like to hear this. I just, again, no regrets on this. I think this was all for the people.

I'm willing to take the L here for the people. You're being. You're being. You take the losses and you give it back to the people. All right. Thanks for listening, everyone. Thank you.