Wall Street's Disdain For "The Little Guy"

If you've been following the markets in even a cursory fashion, you'll note that 2020 (shocker!) has been a volatile, up and down ride for the major equity indices. Of course, no surprise that the markets dropped significantly in the wake of COVID and the major economic shutdowns it precipitated around the globe. Mind you, this thread is NOT about the politics or appropriateness of shuttering business due to COVID, so please direct such comments to the other numerous threads on that topic.

Even without the swings in the market attributable to COVID, anyone watching stocks should by now have concluded that severe volatility is the "new normal" in trading. Many factors play into this. Aside from the ability for news to influence markets in a much more rapid manner than ever before, we know now that 'algorithmic trading' dramatically increases volatility. Again, the inspiration of this thread is not algorithmic trading, but I highly suggest reading up on it to get a sense of what it means and how it affects the stock market. The book "Flash Boys" by Michael Lewis is a good primer to what algorithmic trading is, and how it impacts markets.

So aside from pandemics, and computers trading stocks, what ELSE drives market swings? One newer phenomenon is the emergence of new platforms for day trading. Day trading is not new itself, but now there are so many ways to start trading. For example, the smart phone app from Robinhood has made it easier than ever for "weekend warrior" traders to dive in and begin setting up equity positions, in fact without needing any help from traditional brokerage firms or financial advisors.

In the grand scheme of things, this is probably a net positive thing, leaving out the obvious concern about unwise and naive 'investors' putting their money into the stock market meat grinder in a willy nilly way, not particularly understanding what they are doing. More than ever before, accessibility and opportunity for profiting from the stock market has been handed off to the "little guys", i.e. everyday people not connected to the finance industry or the large institutional investment firms.

Naturally, though, if there is a development that empowers or helps folks from "Main Street" enjoying the fruits of investing their money, you can bet your life that "Wall Street" will despise and critique it.

This condescending tone of the Wall Street insiders is very apparent when reading stories about the volatility and "new normal" of the markets. And naturally, rather than set their aim on algorithmic trading, a very artificial and arcane process that really only benefits Wall Street, the insiders have started blaming (guess who?) "the little guy".

Tengler’s seen that kind of thing more often, lately -- reactions that seem out of proportion to underlying news. It’s a shift in the market’s usual volatility backdrop that gives her pause, even when it works in her favor.

“I could not for the life of me explain why it was up 26% after a 3 or 4 percent move the day before,” Tengler said. “It is inexplicable to me how some of these names have run up on almost no news. And so you have to factor in the Robinhood cohort who tend be chasing a lot of these names and driving them up further.”

Traditionally, advancements in technology and automation that benefit capital vs. labor have been celebrated in Wall Street, as it provides an ability to emphasize the dependence on blue collar workers; more and more profit can be extracted when you have to pay less of "the little guys". Now, however, we see that technology is turning the tables to where esoteric mechanisms of the markets, e.g. options trading, currency markets, orders based on price thresholds, are becoming more and more accessible to "the little guy".

Jason Goepfert, president of Sundial Capital Research, says that while SoftBank may be the biggest player, it can’t be just one firm whipping up markets. Small day traders have spent $40 billion in call premiums in a month, data he compiled from the Options Clearing Corp. show. That’s a hefty amount for retail investors to be wielding and dwarfs what SoftBank is reported to have spent.

“Softbank as a call buyer makes sense, as does the underlying buying it generates. But trades less than 10 contracts swamped the rumored Softbank buys, so clearly others were trying to tag along for the ride,” Goepfert said. “Not sure why now versus other years, other than stay-at-home boredom. Maybe the retail crowd saw this as their last, best change to get rich quick.”

If you read between the lines, Mr. Goepfert is lamenting the fact that "little guys" (small trades less than 10 contracts) are trying to cash in on the inflating bubble of tech equities. How DARE everyday folk try to make their money work harder for them! The NERVE!

Every story I've read this week about the large gains in the markets, mostly in the tech sector, have characterized the gains as "froth". I would say that is not an inaccurate depiction, but it is amusing to hear the insiders throw barbs at "the little guys" and their alleged role in increasing equity prices.

Of course, all of this is incomplete without the additional context of modern monetary policy, Quantitative Easing, and essentially the collapse of interest bearing savings accounts, which have been for generations a vital means of the middle class saving for retirement. That is a topic I've touched on in previous threads, and is a bit tangential to this phenomenon, but not totally irrelevant. I would ask Mr. Goepfert, since the FED and large banks, in conjunction with Wall Street, have conspired to make large scale borrowing practically free with microscopic (even negative!) interest rates, and the ripple effect has carried over to savings accounts, .... what is it you expect people to do?? Without the ability to generate income from CDs and savings accounts, why would it surprise you that "the little guy" would crash the party and seek to grab some chunk of the stock market bubble?

It's always important to keep in mind that the stock market, while at one time was a critical component of capitalism, an efficient means of raising money and investment for companies undertaking new ventures, assisting innovators by funding their efforts to deliver more products to benefit the public, it has now morphed into something entirely different. There is arguably negligible or no connection to the gains of the stock market relative to the US economy. Do I hate the stock market? HELL NO! It is a key element of investing your hard earned money and maximizing your assets. Just one thing to keep in mind: never forget that Wall Street and it denizens, unless you are on the inside and one of them, is not your ally. The view you, "the little guy", as a simple rube from which to extract money, and unfit to participate in their club. Always consider that when you are considering how to invest your money. Understand the game. Understand the players.

all the exchanges are dead.....the new one the biggest criminals started goes live on the 21st.......then full bore on the 29th....Sept. 2020....which is the last day of the u s fiscal year


MEMEX..... head honcho is Madoffs buddy....and Goldman.....and Chase Morgan and.....

memex is ready for when the others get the axe

a reply to: SleeperHasAwakened

Go look at WallStreetBets on reddit. They're a bunch of mostly satirical degenerates who openly gamble rather than investing. They only do options, and a few there are gambling tens or hundreds of thousands of dollars on single plays.

I go there for the lulz, but it's wild to see.

The top is in.

a reply to: SleeperHasAwakened

Back in the late 90's or early 2000's, to be honest it's all kinda a complete blur but I think it was 98 or 99. I answered a job ad in south Florida and it led me to a commodities brokerage. I took a few weeks of classes and I was, I believe, the only one that passed the series 3 exam in my class.

That exam gave entry into the company. The mentality there was one of absolute sociopathy. I asked when I started if I could actually sell gold and silver futures instead of the company favorite oil futures. At the time silver was below $5 and I was convinced it was a good investment. They said I could, but they were feeding us oil futures propaganda so it wouldn't be smart to go against the grain.

If I wasn't a dumb youth I would have contacted the FBI and turned on them. Instead, after two weeks, I quit and ran back to Maine. Years later I looked them up and discovered the DOJ eventually charged the principals of the firm. They had been dodging enforcement by changing the principal owner every time the law caught up with them. The fines were crazy.

Those people hated their clients and sought only to exploit them. While there are many people out there that want to help clients make money there are also vultures that only want to make money. I would not be at all surprised if some of the garbage people I worked with there later got into the mortgage scams of the 2000's. Absolute scum that would eagerly screw whoever they could for a quick 100k.

Until the US government ends the policy of bailing out terrible institutional finance disasters this will never change. It's trickle-down corruption. The highest levels are corrupt, which enables lower level grifters to make money. The institutional finance sector continues to pay these grifters because in the end, when the chickens come home to roost, the taxpayers pay the institutional finance sector via the government.

Truly disgusting.

I've been using Robinhood for a couple of years now and I enjoy it. I didn't sign up as a base for retirement investments but more of a sandbox to see if I have any skills at researching stocks and predicting a good investment. (SPOILER ALERT: I don't)

For those not familiar with the app, it goes something like this.

You link a funding source (checking account for example) to Robinhood and transfer money to your account there. There is no minimum balance required.

With a free, Basic account, your money sits in your RH account for a few days.
Once cleared, you can buy stocks based on your available balance and monitor performance real time both during market hours and after-hours.
When you buy a stock, it's not necessarily purchased at the price you see but at the best available price when the trade was initiated. This can be confusing to many and has bitten me a couple of times.
When you sell a stock, again it's at the next price available which isn't always indicative of what you see in the app.
You can negate these price confusions by using LIMIT orders, where you set the price (per share) to buy or sell a stock.

For shares sold, the money is marked as "pending" towards your balance for a cycle of usually about 3 business days iirc. After that time, it will be available to withdrawal or to buy other shares. I'm guessing that during this hold-time there is interest being earned by Robinhood on those funds, which would make sense.

Now....for a PREMIUM account (and I'm making some assumptions here as I don't use this level of service)
You pay a monthly fee which enables you to "day-trade". Funds are immediately available after seeding your account from a source account and from sales of stocks you own. You also have access to fractional-shares which is a good way to "get a piece of the pie" from larger stocks like Amazon, Google, Apple etc. I'm not entirely sure how those work

All in all it's been a fun experience watching some funds go up and not so fun watching some go down but hey, that's the nature of investing.

originally posted by: Ksihkehe
a reply to: SleeperHasAwakened

Back in the late 90's or early 2000's, to be honest it's all kinda a complete blur but I think it was 98 or 99. I answered a job ad in south Florida and it led me to a commodities brokerage. I took a few weeks of classes and I was, I believe, the only one that passed the series 3 exam in my class.

That exam gave entry into the company. The mentality there was one of absolute sociopathy. I asked when I started if I could actually sell gold and silver futures instead of the company favorite oil futures. At the time silver was below $5 and I was convinced it was a good investment. They said I could, but they were feeding us oil futures propaganda so it wouldn't be smart to go against the grain.

If I wasn't a dumb youth I would have contacted the FBI and turned on them. Instead, after two weeks, I quit and ran back to Maine. Years later I looked them up and discovered the DOJ eventually charged the principals of the firm. They had been dodging enforcement by changing the principal owner every time the law caught up with them. The fines were crazy.

Those people hated their clients and sought only to exploit them. While there are many people out there that want to help clients make money there are also vultures that only want to make money. I would not be at all surprised if some of the garbage people I worked with there later got into the mortgage scams of the 2000's. Absolute scum that would eagerly screw whoever they could for a quick 100k.

Until the US government ends the policy of bailing out terrible institutional finance disasters this will never change. It's trickle-down corruption. The highest levels are corrupt, which enables lower level grifters to make money. The institutional finance sector continues to pay these grifters because in the end, when the chickens come home to roost, the taxpayers pay the institutional finance sector via the government.

Truly disgusting.

I'm onboard 100%. The financial damage inflicted by fraudulent bankers and investors, particularly after the 2008 crash, is incalculable, especially when you consider how many evictions and even erroneous/mistaken evictions took place. Not even considering how much of taxpayer money went to prop up these crooks after the markets imploded.

Like I said, trading and equities markets do, /in theory/ have a place in a capitalist society, but they have become so distorted, abused and rigged that whatever benefit they used to have in helping legit companies manage risk of startup capital is overshadowed by the 'get rich quick' casino mentality rampant in Wall Street today.

originally posted by: TXRabbit
I've been using Robinhood for a couple of years now and I enjoy it. I didn't sign up as a base for retirement investments but more of a sandbox to see if I have any skills at researching stocks and predicting a good investment. (SPOILER ALERT: I don't)

For those not familiar with the app, it goes something like this.

You link a funding source (checking account for example) to Robinhood and transfer money to your account there. There is no minimum balance required.

With a free, Basic account, your money sits in your RH account for a few days.
Once cleared, you can buy stocks based on your available balance and monitor performance real time both during market hours and after-hours.
When you buy a stock, it's not necessarily purchased at the price you see but at the best available price when the trade was initiated. This can be confusing to many and has bitten me a couple of times.
When you sell a stock, again it's at the next price available which isn't always indicative of what you see in the app.
You can negate these price confusions by using LIMIT orders, where you set the price (per share) to buy or sell a stock.

For shares sold, the money is marked as "pending" towards your balance for a cycle of usually about 3 business days iirc. After that time, it will be available to withdrawal or to buy other shares. I'm guessing that during this hold-time there is interest being earned by Robinhood on those funds, which would make sense.

Now....for a PREMIUM account (and I'm making some assumptions here as I don't use this level of service)
You pay a monthly fee which enables you to "day-trade". Funds are immediately available after seeding your account from a source account and from sales of stocks you own. You also have access to fractional-shares which is a good way to "get a piece of the pie" from larger stocks like Amazon, Google, Apple etc. I'm not entirely sure how those work

All in all it's been a fun experience watching some funds go up and not so fun watching some go down but hey, that's the nature of investing.

Good explanation of Robinhood. I myself installed it, but I never actually linked it to my bank account. I felt a bit uneasy, but others have reported success and no adverse effect on their finances or credit scores. I know Robinhood had a pretty significant, wide-spread service outage due to a software issue not long ago, but it was mitigated rather quickly.

FWIW, Fidelity has a very good trading platform, that can permit you to post all the market orders you described, stop loss, limit, etc. That is who I use. Additionally, they have a pretty decent set of stock screener tools, and Fidelity has a lengthy track record and solid reputation. Would definitely recommend Fidelity for anyone looking to dip their toes into trading, but BE CAUTIOUS; dip your toe, then your foot, then your ankle, please don't simply jump in the lake like some folks have recently done via Robinhood and other modern trading apps

Ally is another ok one. But I sleep better knowing land doesn’t tank.

One detail I mistakenly left out re:Robinhood is that you also have access to trade in crytocurrencies should that be of interest

originally posted by: 38181
Ally is another ok one. But I sleep better knowing land doesn’t tank.

Yeah, I've got some cash stashed in a CD at Ally. Was able to set up a 2 year CD at 2%, so hopefully can get a few k of return, and if I need access to quick $$, it's more liquid than having to cash out my trading positions.

I know they have been emailing frequently about their trading platform, maybe I'll put in some coin just to explore it a bit.



ETA agreed about the value of land and property. I have been diversifying as much as I can, money in short and intermediate bond funds, now some metal stacking. Next I think will be some parcels of land up in Central NY where I'm from originally.

a reply to: SleeperHasAwakened

I've got a CD at my credit union at 2.280% for 18 mos. It literally pays to shop around

Anyone here have experience with ETF’s? what’s your thoughts?

To be sure, financial markets have long rewarded misery-enhancing outcomes.

Bad news for a firm’s workers – planned layoffs, for example – is often good news for its shareholders.

But when the bad news engulfed most workers simultaneously, equity markets always fell, owing to the reasonable expectation that, as the population tightened its belt, all income, and thus average profits and dividends, would be squeezed.

The logic of capitalism was not pretty, but it was comprehensible.

Not anymore.

There is no capitalist logic to the developments that culminated on August 12.

For the first time, a widespread expectation of diminished revenues and profits led to – or at least did not impede – a sustained buying frenzy in London and New York.

And this is not because speculators are betting that the UK or the US economies have hit bottom, making this a great time to buy shares.

a reply to: SleeperHasAwakened

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