Rep. Alexandria Ocasio-Cortez (D-New York) and Sen. Ted Cruz (R-Texas) finally found something they can agree on: that trading platform Robinhood’s decision to restrict trading of GameStop (GME) - Get GameStop Corporation Report is a bad one.
Ocasio-Cortez called it “unacceptable” on Twitter. “We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” she said.
Cruz’s response: “Fully agree.”
House Speaker Nancy Pelosi (D-California) said Thursday that Congress would look at what's happening with GameStop. The Joe Biden administration already is looking at it, and "we'll all be reviewing it," she said.
To some extent the decision by Robinhood and other brokerages to curb trading in the stocks that have gone nuts over the past few days makes sense.
The frenzied activity is straining their systems, causing outages. Those outages in turn hurt all retail investors, not just the ones flying in and out of GameStop and the like.
But Ocasio-Cortez also has a point. Hedge funds don’t have to worry about their trading being restricted.
Of course, that’s because their activity isn’t putting strain on trading systems. If hedge funds got caught up in a similar mania and caused similar stress on trading pipes, their activity might well be restricted, too.
It’s hard to argue that hedge funds have it better than individual investors now, when those retail investors are causing billions of dollars of losses for the hedge funds, while earning thousands of dollars for themselves.
In the big picture, we’re witnessing the madness of crowds. And out of all this rabid trading activity, some investors will fund cushy retirements for themselves and others will be left broke.