Tag: finance

Over the weekend social media posts claiming that US tech giants Google and Apple “removed” Palestine from their map applications went viral. 

The posts were somewhat misleading, notably one which garnered over a million “likes” on Instagram, given it appears Palestine had never been labeled on the searchable maps in the first place.

Yet it still unleashed a storm of controversy, leading to Palestinian leaders calling for a boycott of Google among their population, and the Palestinian Authority (PA) declaring it would look for an “alternative”.

Put #PALESTINE back on the MAP. 🗺 #Google pic.twitter.com/1B1CUWCEcD

— Maher Zainians (@MaherZains) July 16, 2020

As people in the West Bank and Gaza brace for an expected Israeli annexation of the Jordan Valley and up to 30% of West Bank territories, the PA vowed in the wake of the Google controversy: “this is a revolutionary year, and we will fight for the needed change to bring Palestine on the maps,” according to a statement.

Iran also weighed in, with a top diplomatic official in Egypt saying, “Palestine and its history is dug into the hearts of the Palestinian people and the free people of the world. Although Google removed the name of Palestine from the map search, you will not forget the awakened human consciences of Palestine,” as quoted by the Iranian Student News Agency (ISNA).

In prior statements Google appears to have denied the substance of what are actually long running accusations:

“Our approach to photographing the areas on the maps has not changed, as Google gets information from organizations and mapping sources when determining how to place the disputed borders, and we are still neutral with regard to geopolitical differences and making every effort to objectively display these areas,” it said.

The Independent noted above the above viral social media post: 

Apple and Google have been accused of deleting Palestine from their online maps, despite it never being labelled in the first place.

Searching for Palestine on Apple Maps and Google Maps shows an outline for the Gaza Strip and West Bank territories, but no labels for Palestine.

The claims that it was removed appear to stem from a viral Instagram post by a user called “Astagfirvlah” on Wednesday, which accused the technology giants of “officially removing” Palestine from their maps.

Still, it will be interesting to see how fast Google moves if and when Israel moves to annex swathes of West Bank territory, as PM Netanyahu has recently promised.

Should this actually become the reality on the ground, we wonder: how fast will the deeply contested “change” be reflected in Google maps?

Authored by Michael Snyder via The Economic Collapse blog,

It is during moments of great crisis that we find out who we really are, and that is why the governmental response to the COVID-19 pandemic has been so heartbreaking.  Instead of rallying around our founding principles, Democrats and Republicans have both gravitated toward “solutions” that are in the exact opposite direction.  Bigger government programs, more government tyranny and huge socialist transfer payments have all been greatly welcomed by the mainstream media and by large portions of the U.S. population, and at the same time very few voices are warning us that these measures are eroding our fundamental rights, exploding the size of our national debt and setting extremely dangerous precedents for the future.

Once people become accustomed to receiving money directly from the federal government, it is exceedingly difficult to ever cut those payments off.  If you think back through our history, it is difficult to name a single major transfer payment program that was ever rolled back.  Over time, our federal government has just gotten bigger and bigger and bigger, and it is now the biggest government that anyone has ever seen in the history of the entire planet.

Yes, tens of millions of Americans are deeply hurting right now.  Over the past 17 weeks, a total of 51.3 million Americans have filed new claims for unemployment benefits, and that represents the most dramatic spike in unemployment that the U.S. has ever experienced.

And since most Americans were just barely scraping by financially coming into this year, we are facing a future in which millions upon millions of our fellow citizens aren’t going to be able to pay their bills.  In a recent article, USA Today featured the tragic story of a 35-year-old hair stylist named Chelsie Caudle…

The mother of two has run into delays applying for unemployment and food stamps in Portland, Oregon, after Grace Salon, a hair salon that specializes in cutting and coloring, was forced to shutter in March when the coronavirus pandemic hit.

Caudle, who is self-employed, sublet a spot at Grace Salon to run her own business called Benjamin LLC. But with no income coming in for months, bills piled up, making it hard for her to afford groceries for her family, she says.

I think that most of us can identify with what she is going through, because nearly all of us have experienced the same thing at some point in our lives.

In order to relieve the suffering of those that found themselves suddenly unemployed, Congress approved $600 a week unemployment bonuses as part of the 2.2 trillion dollar CARES Act that it passed in March…

The $600 weekly payments from the Federal Pandemic Unemployment Compensation program were put in place as part of the $2.2 trillion CARES Act that Congress passed in late March amid the coronavirus pandemic. Americans who are eligible for unemployment insurance receive an extra $600 on top of what they normally claim under their state’s benefits. Yet this boost is scheduled to end for all states except New York, on Saturday July 25, 2020. New York’s end date is Sunday, July 26, according to the Department of Labor.

For a while, it sounded like the Republicans were actually against extending the extra unemployment benefits, but now it appears that they just hope to reduce them a bit…

On Sunday, The Washington Post reported that in light of the enhanced $600 per week federal unemployment benefits poised to run out in less than a week, the White House and top Senate Republicans are considering measures including extending a smaller-scale weekly federal enhanced unemployment benefit of $200 or $400 per week or means-testing future federal unemployment benefits.

In the end, the Republican socialists in Congress will probably fold like a 20 dollar suit like they always do, and so the Democratic socialists in Congress will likely end up with most (or all) of what they want in this next “stimulus bill”.

And very few people will even talk about the fact that this new “stimulus bill” will steal trillions of more dollars from future generations of Americans.

This is what socialism always does.  It steals money from one group and gives it to another.

In our case, we have been stealing from future generations for so long that we have absolutely obliterated the bright future that they were supposed to have.

Meanwhile, the calls for “a second stimulus check” are becoming louder as well.

In fact, one recent survey found that a lot of Americans want the next “stimulus check” to be even bigger than the last one…

More than two-thirds of Americans say they still need a second stimulus check from the government to help make ends meet, according to recent data from tax preparer Jackson Hewitt. And about a third of that group said the $1,200 checks needed to be more than the previous round. Only about a quarter of them say they wouldn’t need another emergency payment.

When the first round of stimulus checks went out, I warned that this was setting a very dangerous precedent and that people would soon want more checks, and I was precisely correct.

There are a lot of good conservatives out there that felt guilty about taking the first round of stimulus checks because they recognized that the checks represented a giant step toward socialism.

I can definitely understand why people were feeling conflicted, but my advice is to accept whatever checks the government sends to you.

Because at this point what we are facing is a battle for survival.  We are entering a truly nightmarish chapter in American history, and our entire system is going to fail.  If a little bit of extra money can help you and your family get prepared for what is coming, that is a good thing.

However, it is also appropriate to mourn for what has been lost.  At one time, America was a beacon of hope in a world where billions were living under socialist tyranny.  But now we are racing toward full-blown socialism at a pace that is absolutely breathtaking, and nearly all of our politicians have completely abandoned our founding principles.

There was some hope last year that IBM was finally turning things around: after all, after 5 consecutive quarters of declining revenues, the company had just managed to grow its top-line for the first time since Q2 2018, and only for the 4th time in the past 8 years. Alas it was not meant to be, and moments ago IBM revealed that after sinking in Q1, revenue once again declined in the first quarter, sliding another 5.4% – the biggest annual drop in sales since Q4 2015 –  amid the spread of COVID-19, even as Red Hat sales boosted its cloud business up 30% Y/Y to $6.3BN.

That said, there was a silver lining: after the company reported the lowest revenue in the 21st century last quarter at $17.6BN, in Q2 IBM managed a modest sequential rebound, with revenue rising to 18.1$BN, even as Wall Street was expecting another 20 year low in the top-line.

Some more Q2 revenue details, which beat across every single product group:

• Cloud and cognitive software revenue $5.75 billion, better than the estimate of $5.58 billion
• Global business services revenue $3.89 billion, better than the estimate of $3.74 billion
• Global technology services revenue $6.32 billion, -7.6% y/y, also better than the estimate of $6.17 billion
• Systems revenue $1.85 billion, +5.6% y/y, estimate $1.65 billion

Not only did the long-suffering tech giant report stronger than expected revenues, its also posted EPS that came in at a whopping $2.18, far above the $2.07 expected… which was a 31% drop Y/Y.

Also here is the “beat” in question:

As usual, this EPS number was the product of aggressive accounting magic because the unadjusted EPS was $1.52, or 30% below the adjusted number. The GAAP to non-GAAP bridge was, as usual, ridiculous and a continuation of an “one-time, non-recurring” addback trend that started so many years ago we can’t even remember when, but one thing is certain: none of IBM’s multiple-time, recurring charges are either one-time, or non-recurring.

“Our clients see the value of IBM’s hybrid cloud platform, based on open technologies, at a time of unprecedented business disruption,” said Arvind Krishna, IBM chief executive officer. “We are committed to building, with a growing ecosystem of partners, an enduring hybrid cloud platform that will serve as a powerful catalyst for innovation for our clients and the world.”

Just like last quarter, IBM did not have enough visibility into the future to give any guidance, yet it was confident enough that no matter what happens it will keep handing almost every penny it makes to its shareholders, as was the case in Q2, when IBM’s free cash flow was $2.3 billion, and the company returned $1.5 billion to shareholders in dividends.

“Our prudent financial management in these turbulent times enabled us to expand our gross profit margin, generate strong free cash flow and improve our liquidity position,” said James Kavanaugh, IBM senior vice president and chief financial officer. “We have the financial flexibility to continue to invest in our business and return value to our shareholders through our dividend policy.”

And speaking of cash flow, IBM ended the second quarter with $14.3 billion of cash on hand which includes marketable securities, up $5.2 billion from year-end 2019. Debt, including Global Financing debt of $21.9 billion, totaled $64.7 billion.

So while IBM’s core business remains a melting ice cube, a strong quarter from Cloud which helped the company’s revenues beat expectations, was enough to push long-suffering IBM stock some 5% higher after hours, although if prior quarter are an indication most of this gain will be gone by tomorrow morning.

 

SSDD!! More vacuous vaccine headlines and a spurious tech stocks upgrade sent a message to the bears (for today)…

After a brief pause at the end of last week, buying big tech stocks is back on the agenda, with Nasdaq massively outperforming today…(NOTE how linear today’s rally was)

Source: Bloomberg

And as Nasdaq surged, Small caps underperformed, reversing much of last week’s “reversal”

Source: Bloomberg

This has sent Bloomberg’s Fear-Greed indicator to its highest ever – above March 2000’s previous peak – and as @C_Barraud notes that these highs contrasted with a plunge in March that produced record weekly lows, surpassing those in December 2018 and May 2000.

Source: Bloomberg

The surge in tech was sparked by a Goldman and Jefferies upgrade for AMZN…

Source: Bloomberg

…erasing FANG stocks’ losses from Friday… (despite Goldman warning that all the big tech valuations are massively expensive)

Source: Bloomberg

And TSLA back to its old tricks…

Source: Bloomberg

Treasury yields ended the day marginally lower but bonds were sold from

Source: Bloomberg

Treasury vol has tumbled near record lows…

Source: Bloomberg

The dollar dropped back to its recent range lows…

Source: Bloomberg

Crypto weakened into the cash equity close today but held gains barely from Friday…

Source: Bloomberg

Commodities were all generally higher on the day with silver dramatically outperforming…

Source: Bloomberg

Silver futures topped $20 for the first time since Sept 2016…

Source: Bloomberg

Finally, just saying…

Source: Bloomberg

Several days ago we reported about a Florida man in his 20’s who had died from a motorcycle accident, but was subsequently placed on the state’s Covid-19 death list despite his (rather obvious) non-Covid related cause of death. 

This past weekend, after scrutiny from several news outlets including Florida’s Fox 35, who broke the story, the death “was reviewed and he was taken off the list for COVID fatalities.”

The decision to take the death off the list comes just two days after Fox 35’s initial report. Fox 35 did an investigation last week where they talked to Orange County Health Officer Dr. Raul Pino about two deaths of people in their 20s that were labeled coronavirus deaths.

When they asked if the people who died had underlying conditions, Pino had responded: 

“The first one didn’t have any. He died in a motorcycle accident.”

At the time, Pino was asked about whether or not the motorcycle victim’s data was removed from the state’s Covid system and responded by saying: 

“I don’t think so. I have to double-check. We were arguing, discussing, or trying to argue with the state. Not because of the numbers — it’s 100…it doesn’t make any difference if it’s 99 — but the fact that the individual didn’t die from COVID-19…died in the crash. But you could actually argue that it could have been the COVID-19 that caused him to crash. I don’t know the conclusion of that one.”

As Fox 35 noted at the time, it seemed to stand at odds with how the Florida Department of Health explained how they were reporting Covid deaths.  

The state had told Fox: “A COVID death is determined if COVID19 is listed as the immediate or underlying cause of death, or listed as one of the significant conditions contributing to death. Or, if there is a confirmed COVID-19 infection from a lab test – and the cause of death doesn’t meet exclusion criteria – like trauma, suicide, homicide, overdose, motor-vehicle accident, etc.”

You can watch Fox’s original report on the motorcycle accident here:

And, as we pointed out in our original article, for those wondering about how Covid deaths are being counted, this April interview on Fox News with Dr. Scott Jensen does a good job of explaining just some of the issues:

 

Kanye West’s “presidential campaign” came in fast and furious, and may have ended even faster.

According to Politico, the rapper “did not submit a petition required for him to appear on the 2020 presidential ballot in South Carolina by Monday’s deadline, the state’s election commission said, despite holding the first and only rally of his presidential campaign there on Sunday.” West had faced a noon deadline to submit 10,000 petition signatures to appear on the ballot but failed to do so, said South Carolina Election Commission spokesperson Chris Whitmire.

As a reminder, having initially declared himself a supporter of President Donald Trump and teasing a future presidential run, West announced his White House campaign on the Fourth of July. Amid questions about how serious his plans to run were, the rapper filed a statement of candidacy with the Federal Election Commission last week, listing “BDY” — the Birthday Party — as his party affiliation.

So while it remains unclear if Kanye’s campaign to become president ended as abruptly as it started, Rabobank’s Michael Every took a peak at what his campaign may have been based on disclosures during his first (and ostensibly last) campaign address.

As the Rabo strategist writes, the highlights of the event included:

• #Ye stating that he wishes to “save the country” – which is something most voters can get behind;
• that “shooting guns is fun” and without that right the US could be “enslaved” by China or other countries – so clearly pro-Second Amendment;
• a move away from industrialisation back to agriculture as the industrial revolution is over – which seems timely as people flee big cities;
• that marijuana should not just be legal, but free;
• a precautionary note that he isn’t prepared to go against Big Pharma because “they would kill” him – so cynics might say he has a better grasp of US realpolitik than his critics claim;
• and the proposal that US new-borns should be given USD1MM as, after all, “The money’s not even real, and didn’t we just stop all the jobs for six months?”. 
• Kanye added the US and other wealthy countries should pay to implement the same scheme worldwide.

As Every concludes, “that is an argument for MMT – and certainly a version that is going to see a whole lot more consumer spending ahead than if it funds corporate tax cuts and/or bailouts.”

Let’s see how goodwill, good for guns, going rural, free ganja and free government hand-outs with “not even real” money do in the presidential polls. Surprisingly well, I suspect.

If Kanye is indeed done, will Trump now piggy back on the rapper’s talking points in hopes of also grabbing his voter base…

New York Democrats seem hell bent on driving as many people out of the state as possible. Not only has Mayor Bill de Blasio essentially turned New York City into a demilitarized zone by pulling back on policing, but there are now talk about resurrecting the state’s tax on stock trades. It’s no wonder thousands of hedge fund managers are leaving the city for far more hospitable places like Florida.

Legislators could be prompted to make changes as the state loses approximately 20% of its revenue, which would leave a $61 billion deficit over four years according to Bloomberg. Progressive democrats “are on the ascent” in the state’s legislature while, at the same time, stock trading in the state is on the rise. As a result, the progressives smell blood, as taxing these trades could raise $13 billion per year and stop cuts to numerous government services.

Andrew Silverman, a Bloomberg Intelligence analyst said: “If ever there was an opportune moment for New York to resurrect its stock transfer tax, it’s now. The state legislature is probably more amenable now than at any time in decades.” The stock transfer tax could drive revenue from outside of the state, as well, as it taxes trades that occur in New York, even if the person directing the trade is out of state. 

About 100 members of the 213 members of the New York legislature signed a letter last month suggesting that the state consider raising taxes on the rich before it cuts spending. Democrats have also proposed raising taxes on billionaires and large corporations. There is currently a 100% rebate on the tax that has been in place since 1981 when the New York Stock Exchange threatened to leave New York.

We’re not sure why politicians think that couldn’t happen again. After all, they are asking for it.

The left’s argument for the tax is that in 2016, the wealthiest 10% of Americans owned 84% of stocks. The author of the study that determined this, Edward Wolff, said: “Every single significant exchange in the world has a financial transaction tax save one, which is Germany, and they’ve proposed it there. Is the London Stock Exchange out of business? Have they moved to Dublin?”

The proposed bill is arguing for a 1.25 cent tax on the sale of stock worth $5 or less and a tax of up to 5 cents for stock worth over $20 per share. The revenue would go to New York’s general fund for three years and then would go to infrastructure and the MTA.

The tax would (obviously) find heavy opposition from banks and Wall Street firms. Wall Street is already responsible for 17% of the state’s tax revenue and 181,200 jobs.

The risk of unintended consequences is not daunting Democrats: Freeman Klopott, a spokesman for Democratic Governor Andrew Cuomo’s budget office, concluded: “In the digital age it would be even easier for transactions to simply be moved out of state to avoid the tax.”

What the democrats don’t seem to understand is that much of this legacy tax revenue – and the jobs that create it – could be at risk as they continue to push businesses out of the state with additional taxes. And what’s the point of a new tax when it is offset by a mass exodus of the the states’ biggest taxpayers, resulting in a far more dire fiscal outcome?

Authored by James Rickards via The Daily Reckoning,

Remember “green shoots?”

That was the ubiquitous phrase used by White House officials and TV talking heads in 2009 to describe how the U.S. economy was coming back to life after the 2008 global financial crisis.

The problem was we did not get green shoots, we got brown weeds.

The economy did recover but it was the slowest recovery in U.S. history. After the green shoots theory had been discredited, Treasury Secretary Tim Geithner promised a “recovery summer” in 2010.

That didn’t happen either.

The recovery did continue, but it took years for the stock market to return to the 2017 highs and even longer for unemployment to come down to levels that could be regarded as close to full employment.

Now, in the aftermath of the 2020 pandemic and market crash, the same voices are at it again.

The White House is talking about “pent-up demand” as the economy reopens and consumers flock to stores and restaurants to make up for the lost spending during the March to July pandemic lockdown.

But, the data shows that the “pent-up demand” theory is just as much of a mirage as the green shoots.

Many of the businesses that closed have failed in the meantime. They will never reopen and those lost jobs are never coming back. Even people who kept their jobs are not spending like it’s 2019.

Instead they’re saving at record levels.

Even the “reopening” of the economy is now in doubt. In some cities, the reopening was derailed by riots that left shopping districts in ruins.

In other cities, the reopening was stopped in its tracks by new outbreaks of the virus that led to new lockdowns and strict application of rules on wearing masks and social distancing.

There was a pick-up in retail sales in May, but it has disappeared as fast as it arrived because of the new outbreaks and the extension of the lockdown.

Meanwhile, if you’re trying to understand the economy, pay no attention to the stock market. The stock market is almost completely disconnected from the economy.

That’s partly because of the massive distortions caused by the Fed. But it’s also because the stock market is heavily weighted toward finance and technology.

Both sectors have been relatively unaffected by the pandemic and the resulting economic shock.

The industries that have been hurt are small-and-medium sized businesses in food, travel, resorts, bars, hotels, salons and other bricks-and-mortar or personal service establishments. Pain was also felt in mining, manufacturing and some other sectors.

These are important businesses in the economy, but they’re not nearly as important to major stock market indices as Amazon, Apple, Facebook, Google, Netflix, Microsoft and other mainly digital companies.

If you want to understand the economy, look around your own community to see how many stores are still closed, how many are never reopening, and how much sales are down among the relatively few survivors.

It’s not a pretty picture, and based on the dynamics of the virus it won’t get better anytime soon.

But there’s another primary reason why the economy won’t recover anytime soon. It’s not getting much coverage in the mainstream press, but it should.

It involves a major population shift that only happens once every two or three generations. And it’s happening now.

The European summit which started on Friday and continued into Monday, where top politicians were meant to agree on the composition of Europe’s recovery fund (originally proposed at €500BN in grants and €250BN in loans), was painfully, excruciatingly long, even by European standards, but it appears to have finally concluded, and following some rather heated and angry comments – mostly aimed at the Dutch Prime Minister Mark Rutte who has emerged as Europe’s new paymaster now that Merkel has succumbed to MMT – we finally have a deal.

So what’s in it? As we previewed yesterday, instead of the €500BN in grants demanded by Italy and all the other deadbeat European states, and instead of the €350BN that the “Frugal Four” were willing to release, Europe has agreed on €390BN in total grants.

Here is the rest of the deal headlines, as summarized by Reuters:

• LATEST PROPOSAL FOR EU LEADERS ON RECOVERY FUND: REPAYMENT OF THE TOTAL 750 BLN EURO BORROWING BY EU COMMISSION UNTIL DEC 31, 2058
• LATEST PROPOSAL FOR EU LEADERS ON RECOVERY FUND: 70% OF ALL GRANTS TO BE COMMITTED IN 2021, 2022, REMAINING 30% IN 2023
• GRANTS IN 2021 AND 20222 TO BE ALLOCATED ON THE BASIS OF, AMONG OTHERS, AVERAGE UNEMPLOYMENT IN A COUNTRY IN 2015-2019
• IN 2023, UNEMPLOYMENT CRITERION FOR GRANT ALLOCATION IS TO BE REPLACED BY GDP FALL IN 2020-2021 -DOCUMENT 
• ASSESSMENT OF NATIONAL RECOVERY PLANS TO BE FINANCED BY THE EU RECOVERY MONEY WILL BE DONE BY EU MINISTERS VIA QUALIFIED MAJORITY, BASED ON A COMMISSION PROPOSAL
• POSITIVE ASSESSMENT OF PAYMENT REQUESTS WILL BE SUBJECT TO MEETING RELEVANT MILESTONES AND TARGETS – DOCUMENT
• EU GOVERNMENTS WILL HAVE TO SPEND 30% OF THE RECOVERY FUND MONEY ON MEETING TARGETS RELATED TO FIGHTING CLIMATE CHANGE – DOCUMENT
• OVERALL AMOUNT OF THE EU’S NEXT LONG-TERM BUDGET FOR 2021-2027 IS TO BE 1.074 TRILLION EUROS -PROPOSAL DOCUMENT
• EU MONEY FROM THE EU BUDGET AND RECOVERY FUND WILL BE LINKED TO GOVERNMENTS OBSERVING RULE OF LAW -DOCUMENT

All of the above is, of course, meaningless and the only thing that does matter is whether the ECB will keep monetizing all European debt issuance. The rest is just boring, very, very boring theater of the kind that Europe’s has perfected over the past two decades.

Authored by Paul Rowady, director of research at Alphacution

“They make it so easy.” – Richard Dobatse, Robinhood user (via New York Times)

“A fool and his money are soon parted.” – Thomas Tusser, poet

Imagine if you knew, ahead of time, exactly what bait to use?

Not only which bait to attract and influence the behavior of specific customers, but how to package the output of those behaviors – into an additional form of bait – in such a way as to leverage US listed market structure and maximize the probability of financial windfall. If so, chances are, you would share some of the vision that the founders of retail trading app and rising zeitgeist symbol, Robinhood, did circa 2013…

Now, the fact that Alphacution has been beating this drum for four weeks in a row (starting here, here and then here) is unintentional and unrehearsed. Certainly, we much prefer that our riffs come with a level of variety – and we will return to that variety shortly. However, as we have been grinding the numbers around order routing revenue, the new Rule 606 reporting format, provocative players (like, Robinhood) and secretive players (like, Citadel Securities, G1X/SIG or Two Sigma Securities, among others), we continue to learn more about how this puzzle fits together…

Our latest findings – and the thing that makes this next seemingly redundant drum beat necessary – relate to the economic value of trailing stop loss orders…

Most amateur traders are taught to use stop loss orders to do precisely what they say they are supposed to do: limit losses. For traders that aren’t able to watch their risks all day long, stop loss orders represent one tool by which part-time traders – like those who have other day jobs – can put their trades on autopilot. Moreover, in a zero-commission environment, there is no explicit cost to the trader if a trade gets stopped out. That trader can always get back into the trade, at no explicit cost.

Now, from an order flow perspective, it turns out that stop loss orders – and other variants, like trailing stop loss orders – are quite valuable. This category of orders is otherwise known as non-marketable limit orders (NMLO’s), and they are the type of order that high-speed market makers covet more than any other, as we will illustrate below:

Based on Alphacution’s current assembly of ~$490 million in order routing revenue for Q1 2020, NMLO’s represent 45.4% of the total – or, $222.9 million – and, the sum of marketable and non-marketable limit orders represent 67.7% of the total – or, $332.3 million:

That’s all fine and good, but here’s where the plot thickens:

When we break down the contributors to NMLO routing revenue, you’ll never guess who’s punching way above its weight class. Depending on how we account for TD Ameritrade – as two entities (including TD Ameritrade Clearing) filing two separate 606 reports, or as one large retail brokerage platform – Robinhood sits in the #1 or #2 slot, representing $46.0 million (or, 20.7%) in total NMLO routing revenue for Q1 2020 – and clearly larger on this analytic than E*Trade, Schwab, Interactive Brokers (IBKR) and Fidelity (which does not engage in PFOF in stocks, but does so in options):

But wait, it gets even better:

There are 4 categories of order types and 3 categories of products in the new 606 reports, which means that there are (potentially) 12 order type-product revenue pairs for each retailer of order flow. And, of the 12 order type-product pairs for Robinhood, non-marketable limit orders in options represent the largest category of order flow revenue. Not only that, at #2 amongst its peers, this category for Robinhood is within $2 million of being equivalent to the same option NMLO category for the combined version of  (the much larger by client assets) TD Ameritrade as of Q1 2020. In other words, Robinhood is close to being the #1 largest player in the ecosystem by this measure:

With this in mind, let’s return to the idea that the Robinhood figures above have been targeted in advance, by design:

A frictionless and highly gamified environment that is made easy for its users to be stopped out as often as possible (in OPTIONS!) turns out to be a coveted counterparty to those who seek to compete for fleeting slivers of alpha in closest proximity to the sources of listed liquidity. In Alphacution’s vernacular, this is known as the structural alpha zone. By Silly Valley vernacular, this is known – by last count – as $8.6 billion…

In the chart, below, Alphacution presents a detailed summary of Robinhood’s order revenue breakdowns by product category, order type, and broker-dealer:

Hopefully, we can take a break from this topic for a while, but no guarantees. I would not be surprised to see Robinhood’s IPO announcement arrive in the months to come while valuation insanity and historically-aggressive interventionism persist…

Until next time…