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Robinhoodwinked The SEC; Darden’s Breadstick Inflation & Royal Cruise Line Junk

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Robinhood’s Even Flow

Freeeeezin’ … something something something … made of concrete

OK, don’t worry, I’m not about to go all Eddie Vedder on y’all — not today, at least. But one day…

Today, we’re talking about order flow … and, well, the even flow of order flow.

See, way back in the hazy, heady days of 2021, we saw the SEC get Robinhood investors all in a tizzy: SEC Chairman Gary Gensler raised the possibility of banning or severely limiting payment for order flow, aka PFOF.

Huh. That was a year ago already?

Time flies when you’re having … Great Stuff?

And time doesn’t fly too fast over at the SEC, apparently. So a year later … here’s where we’re at: PFOF won’t be outright banned.

But why is that such a big deal for Robinhood, HOOD investors and traders using Robinhood’s platform?

Basically, PFOF is the money that Robinhood makes by selling trade orders.

Normally, a brokerage will seek out the best execution for your order … the fastest speed, the most likely execution and most importantly, the best price. But not Robinhood. When you buy or sell something on Robinhood, the brokerage routes that order to market makers like Citadel Securities.

Thing is, Citadel is using your shares to make bank all in a matter of microseconds, giving Robinhood a kickback called, you guessed it, PFOF.

So instead of the best execution, with Robinhood handling your orders … you get what you get. ‘Course, that’s always been the case with Robinhood. It comes with the territory of no commission fees.

The trades are free so … you get what you get, even if that means worse prices and speeds for your trades:

Our markets have moved to zero commission, but it doesn’t mean it’s free. There’s still payment underneath these applications. And it doesn’t mean it’s always best execution. — SEC Chairman Gary Gensler.

Needless to say, PFOF is Robinhood’s entire essence. Its moneymaking M.O. Its raison d’être. And you can see how a ban on the oh-so-lucrative stuff would’ve been troublesome for Robinhood.

Now, Schwab, TD Ameritrade and all those other big boy brokerages would’ve been just fine if PFOF were banned… They’re not anywhere near as reliant on PFOF as ol’ Robinhood here.

You can see why HOOD shares shot up as much as 3% on the news this morning… But if you read deeper into said news, you can also see why HOOD shares ended the day down 2%. And it’s all over the uncertainty introduced by these few lil’ words: The SEC “would stop short of banning” PFOF.

Would. Stop short. Something’s not all right here.

Gensler’s tone toward PFOF is clear: If there won’t be an outright ban on Robinhood’s PFOF lifeblood, the SEC may still find ways to severely reduce how profitable PFOF can be … which would still be a huge threat to Robinhood.

Give it another … like … year or so in SEC time, and maybe we’ll see something more substantial come from the regulators.

And now, it’s time for the Thursday Throwdown — and you’ve got front-row seats to the virtual octagon! Whatever that entails…

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In A Darden Da Vida

Ah, Olive Garden. Where all is well and peaceful … until your family eats all the dang Andes mints before you get one. And yes, I am still bitter about this, dang it.

Anyway, breadstick baron and Olive Garden parent Darden Restaurants (NYSE: DRI) just reported earnings. And it sounds like more than a few of us took advantage of their endless breadsticks and salad … if you catch my drift.

Darden noted that sales ticked up 6.1% to $2.45 billion, a hair shy of the Street’s order for $2.47 billion. Earnings met estimates, though CEO Rick Cardenas noted how inflation has started to creep into the equation.

Started to??

Hey now, at least Darden isn’t passing as much of those increased operating costs onto customers: Last quarter, menu prices were up 6.5%, trailing total inflation of 9.5%. And hey, Darden is still predicting same-store sales to grow 4% to 6% this year, which, compared to the uncertainty everyone else is reporting, has to count for something, right?

I just wonder if the Olive Garden folks leave some extra mints when they drop off the check — er, earnings report.

Canadaffirm

Great news, Canadian Great Ones! (Yeah, I know there are dozens of y’all out there … dozens.)

Affirm (Nasdaq: AFRM) just signed a deal to bring its “buy now, pay later” fun up to Amazon’s (Nasdaq: AMZN) Canada site.

After all, why shouldn’t folks outside the U.S. get the luxury of overspending under the guise of easy monthly payments? I know, I know, you smart shoppers out there are thinking: “Dude, that’s what a credit card is for.”

But when Affirm has a neat handy button right on the page of the useless junk you want to buy, well, temptation happens. Trust me. It happens. No matter how many times I tell myself this is the last time I’m buying LEGO online. Hypothetically…

Anyway, the news of more juiced up “buy now, pay later” sales sent Affirm shares up 3% … and then they promptly fell about 7%. Some days just be like that.

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Junk Bond Sailor

The imitation picks you up like a habit … writing in the glow of Royal Caribbean’s (NYSE: RCL) static.

A travel agent flashing a fine-lined smile — junk bond trader trying to sell a sucker a stock.

Is this … Elliott Smith? In my Great Stuff?

It’s more likely than you think. Though nothing is as likely (or surprising) as cruise ship operators looking to raise more funding for “imminent financial needs.”

Today Royal Caribbean announced it’s looking to the junk bond market to raise $2 billion to refinance its high-interest debt. The $2 billion would go toward Royal Caribbean’s outstanding 9.125% and 10.875% bonds, both maturing in 2023, with the new bonds due in 2029.

Besides, what’s $2 billion between friends? Pssh… That’s, like, one solid afternoon’s worth of Bahama Mamas up on the Lido deck.

That’s The Power Of Biotech, Baby

Any Spero Therapeutics (Nasdaq: SPRO) investors in our midst today? No? Y’all already hit the Lambo dealerships, I take it.

Check it out: SPRO stock just skyrocketed 188% overnight — reaching as high as 251% this morning. Just … boom. Instantly tripling SPRO investors’ money. No meme stocks. No WallStreetBets action.

Just good old biotech being biotech: Spero Therapeutics signed an exclusive license agreement with GSK (NYSE: GSK) for its “experimental antibiotic for complicated urinary tract infections.”

Experimental antibiotics? Sure, I’d try anything once…

Well, that’s the thing: Spero’s therapy is still in clinical trials, set to reach Phase 3 next year. This would give patients an oral medication option instead of the current in-hospital intravenous therapy.

Still, for a huge biotech giant like GSK to be interested in your clinical therapies … that’s big news, even if the drug is still in testing. There’s a reason why SPRO mooned overnight here — Big Pharma’s even bigger budgets.

What do you think, Great Ones? Got any biotech picks in your sights? Do you use any “buy now, pay later” services? What’s the deal with payment for order flow?

Write to us whenever the market muse calls to you! GreatStuffToday@BanyanHill.com is where you can reach us best.

In the meantime, here’s where you can find our other junk — erm, I mean where you can check out some more Greatness:

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Until next time, stay Great!

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