Let's talk about robin hood, so two people who are considered to be wall street legends, warren buffett, charlie munger, running berkshire hathaway both are very, very rich and they're, also very, very old. Well, the guy in the right, the older guy, i believe, he's 98 charlie munger. He had some pretty harsh words for robin hood. It was disgusting.

Now it's unraveling, there's been some justice. Monger accused robin hood of encouraging short-term gambling and collecting big commissions and criticized its business model for collecting payment for order flow, encouraging short-term gambling. That's the part that i don't really care about because it's your money if you want to go gamble it in the market, if you want to gamble it on sports, if you just want to put it under your mattress, i don't care it's your money. Do what you want with your money, but it's the latter two parts that i really want to dive into here and we're talking about big commissions and that comes from payment for order flow.

So if you haven't been paying attention, robinhood, which is currently trading at 9.89 recently on april 29th, hit a new all-time low of what is this low nine dollars flat ever since its ipo in late july of 2021? It is currently down 73 percent and even from its all-time high, it's like even worse we're down 88 and don't forget. In this period, everyone on mainstream media was still saying: hey like you should buy robin hood. This is a great investment, and this is definitely one of those like what type of like moments, and i think, there's two ways to look at this. They had their earnings last week and they missed they missed on the top and bottom line.

It was a very, very bad scenario, very, very bad scenario: they in 2021, they managed to burn 3.69 billion dollars and in the first quarter of 2022, they've already lost in excess of 300 million more on missing on revenue. Their active monthly users is going down and the money they make per user is also going down. So if you wanted to do a pure fundamental breakdown of the scenario, it's a dumpster fire also on top of it, i think, especially when it comes to robinhood. It's important to understand its public perception, which is also a dumpster fire of a situation.

I just don't think that people trust it. Why would they trust it? It took away the buy button, which i know many many brokerages did and that's a complicated subject referring to the dtcc, and you have enough capital there, for whatever the margin requirement is from the clearing corp. So i think that particular scenario. It really has important nuances to it, but what doesn't is more of how robinhood reacted to it? We know internally from some of these court filings that they were calling out that they have liquidity issues.

But then, the next day, vlad tenef, the boy from bulgaria went on. Cnbc was talking to that guy sorkin and was saying: there's no liquidity issues so and then from there. It very much took this mindset of we're doing what's best for the public, we're doing what's best for our clientele, which is kind of. We know that they engage in payment for order flow, which, right here they do a pretty good job at explaining it.

But for those of you who want to know what it is, it's the practice of a brokerage selling their order flow to a market maker and they're going to execute it instead of it going to a lit exchange like the nasdaq, the new york state exchange iex. It's basically saying: hey citadel or hey virtu: you can play the other side of this trade and the reason they want to do that. The reason why a market maker would pay for order flow is because it makes them a shitload of money. There's a reason why ken griffin, the ceo and founder of citadel, has the most expensive house on this planet, not to mention four additional homes that are all way more money than you could possibly imagine.

They are making billions and billions of dollars and the way they do. This is basically for every order that comes in. They have very fancy schmancy, algorithms and the way they do their matching they're, always making a little bit of money on all of these trades. Like they're, like portions, of a penny, a penny - and this really brings to light the question of - does robinhood - do brokers that engage in payment for order flow.

Is it a conflict of interest? Gary gensler, the the chairman of the sec, has called this out himself of saying: hey this practice, because it might be putting the almighty dollar higher than what's best for your client and in this scenario, we're talking about quality execution. It puts that into question. For example, in may of last year, 2021 rewind the clock about 12 months. You know what gary gensler said: the chairman of the sec, robin hood, explicitly went out of its way to accept higher payment from order flow in return for worse quality execution.

They pitched that the sec chairman himself has said that, like if someone was to be dunking on payment for order flow, it's the chairman and he came out and said this is not good and obviously i'm right there with you. You wish the wheels of justice moved a little bit more quickly. I'm just happy that there's progress and the fact that if you look at something such as we they are investors, they now have a pr rep on capitol hill. So things are moving in the right direction to get rid of a practice that not many people are informed about, but it is not good now.

You might then be questioned well what about things such as public? Well, how do they pull it off? Why are they a commission-free brokerage but they're not doing payment for order flow? There are various ways to actually make money that are not payment for order flows. So, for example, loaning out your shares, loaning out shares is a common practice that brokerages do it. Some brokerages give you the money and then other ones that don't do payment for order flow they're like well. We have to keep the lights on.

We have to pay our people so we'll keep the money from loaning out shares if people want to go short, we'll keep those interest payments and you might have mixed feelings on that. I'm just trying to do like what i can to explain this scenario, but it comes down to this question. Does it mean your free trade? Is it really free? That's exactly what it means when something is free, you're, the product. Everyone needs to understand that, and that's not just true for the market.

It's true for many facets of life. If it's free, they're still making money, there are very few businesses on this planet who are like doing something out of the goodness of their heart. I want to make that explicitly clear so, when you're looking at what brokerage is right for you, which one is wrong for you just spend a couple hours spend a portion of your day diving into how do they actually make their money and when it comes back, Circling this all back to munger and robin hood, robin hood, i think, is going to go extinct. It's attempting to make a pivot more into the world of crypto.

I think it's not enough, and it's a little bit too late right now. Options trading is still their main revenue driver, and even that has been going down and down and down and down, depending on the time frame you're looking at you're over a year, i think it dropped roughly 60 in terms of the money they're making and in terms Of month over month, it's down about 15 percent, it's an absolutely brutal situation, so, no matter how you slice it the fundamental aspect or more of the community, as in retail traders, opinion of it that's very negative. I don't see a single bullish case for robin hood and my mind is blown because then you have certain people like kathy wood who run arkhamvest that are buying robinhood and i just think they're out of touch with the clientele who would potentially use it, because the Numbers are absolutely dwindling.