The contra case to this: Maybe brokerages are not just fuddy-duddy with respect to their marketing approaches. Maybe they are *also* insufficiently quick to react to the economic environment and perform their social purpose, which is getting people invested at rather low prices.
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I think you could believe something like that. It's internally consistent. Robinhood has probably accelerated timeline of one major win for consumers. And you could therefore be proud of e.g. working at Robinhood in a way that you would not be proud of working at e.g. MGM.
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That said, have to say this: as someone who is (in less socially distanced times) a happy customer of MGM, I have no illusions about whether that enterprise is a casino or a financial services provider, despite its substantial investment in providing financial services.
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Anyhow, what would a real money online gaming company be thinking about the current state of the world: "Sweet! Competing entertainment options are getting crushed. MGM is literally closed. Our customers are stuck at home and some have increased risk appetite."
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What would a discount brokerage be thinking about the current state of the world: "#%()#% me (#%))#% me (#%)%#( me net interest margin drives this business and that relies on taking customer deposits and investing them almost risklessly. That word 'almost' is a scary word now!"
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Fun fact about 2008: e*Trade came about *this* close to going bankrupt because it got a little deeper than every other discount brokerage in that notably safe place to park customers' money: home mortgages.
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And so if you're CEO at a discount brokerage right now you're probably less enjoying the massive spike in new account signups (worth ~nothing to you today, nature of the model right) and instead paying *very careful attention* to your daily update on treasury risk.
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For more about discount brokerages, written in the distant mists of history (a year ago) where they actually charged for the product but at a discount: https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ …
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You shouldn't be surprised that a brokerage is doing well in a high-volatility environment. More people trading benefits businesses that facilitate trading. Ex.
@matt_levine pointing out that trading is the bright spot in JPM earnings. -
So there is a value chain here, right? JPM’s trade desk is a different part of the value chain than a discount brokerage. The price of their offering goes *up* when vol goes up and consumption goes up. The price of the *true* offering of discount brokerages went *down*. Risk up.
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