I was discussing this at work today, and thought it would make an interesting discussion.
There are a lot more brokers available out there available to us today, providing a more cost effective means to invest/trade in the market.
There is also a lot more retail investors taking part and buying stocks in the market as never has so many stocks been available for us to trade at such prices before.
There has been a lot more regulatory trade halts, suspensions and such in recent months/years, based on old fashioned rules.
These have the best of intentions, protecting buffers at brokers for all so they can continue to provide services to the wider group, or to allow the regulator time to investigate irregular activity to stop market manipulation if that is, what is taking place.
This raises a lot of questions. Has the market liquidity increased, has there been more market manipulation, or have some broker/regulator guided trading halts inadvertently manipulated the markets themselves?
How much retail activity is there now in the market, and do we need a voice to represent the retail investors. Individually we are small, but collectively we need some representation surely with the regulator?
I think the markets and regulations need to change with the new landscape. Question is to what?
I often wonder that too, especially when I see companies selling off after good earnings as a habit.
Half playing devil’s advocate here, but I do wonder how empowering any regulatory body intervention would be for retail. The pessimist in me thinks the FCA (for example) would only end up restricting what retail investors could or could not do (eg. the recent ban on crypto derivatives).
I think greater regulation will have to follow the boom in retail investment and commission-free brokers. People, unfortunately, do need protecting from themselves. I recently opened a Sipp with a competitor, as an example. It’s scary to think there will be people out there who blindly follow some YouTube or Reddit ‘DD’ and dump their pensions into a handful of meme stocks.
When there is too much liquidity and extreme low interest rates, the retail (and institutional) must seek more risky assets to have some yield.
Eventually when the central banks start to reduce the liquidity and to raise the interest rates, some asset bubbles will pop, and a bunch of retail investors will be pushed out of the markets (and blame the “manipulators”).
So we are living the usual credit cycle of low interest rates and high liquidity. Nothing new.
And in penny stocks, crypto or other get rich schemes. Including Ponzi schemes.
To what regulator? FCA or EU regulators? Or even the US regulators, as we invest in US securities.
We see different regulation approaches, and some investors and companies (including financials) take advantage on that, doing regulatory arbitrage.
For example, EU (and Swiss) regulators are more flexible in crypto ETPs than UK or US. We see the Swiss with new crypto legislation and crypto-friendly regulation and ecosystem (e.g. “Crypto Valley”), EU financial centers are welcoming the listing of crypto ETPs, instead the UK is against crypto ETPs listings (stock exchanges and regulators).
Disclaimer: Not pro or against crypto, just using it as an example.
I don’t know the ratios of professional to retail investments but I am sure if retail increasingly becomes a larger share of market there will on the whole be more volatility, certainly in stocks popular to retail people.
I think one potential benefit to society is some slightly wild business ideas or technology can get funding through spacs or IPOs etc and attract FOMO retail investing based on an idea not an actual business model etc. Many of these will end up losing the retail investors money BUT will sometimes produce a new idea or tech which could further health, energy, food issues that humanity is facing. Like look at APPH, I love the idea, just dont see how it would make me money yet, but others happy to pour money into it, I would love to be a shareholder if it shows signs of more business acumen and a clear path to profitability but in the meantime its money/funding may mean it pushes farming methods further than the status quo.
Yep everything brings opportunity as we have seen with the meme stocks like gamestop and AMC, I agree with your point that when enough of the new speculative retail customers (cant really say investors) lose enough money and/or the world goes back to normal it will fade somewhat, but there will be a lasting amount who become long term investors which is always great to see.
My main thing is I try to avoid the popular ‘trending’ stocks as more noise means less easy to value etc
Yep for sure, I just mean the pace at which some of these stocks move its trickier for me to analyse, for others no problem but I am a bit of a slow and steady.
I believe some of the rules will change with the newer Retail Investors coming in, and I also believe Youtube itself needs to somewhat regulate what Youtubers say to influence the market. The old “I am not a Financial Advisor” doesn’t cut it anymore as I feel this is a failsafe when people who follow them lose money when it falls.
The requirements must be that they show their Portfolio Worth and not percentages, show their losses as well as their gains, they are not allowed to put a number and an X at the end (this is a huge problem), they can only plug one broker that they use (and not 2, 3 or 4 at once, and they must state how much they are in the stock themselves. They must also not have a Patreon page to show what they are buying or selling (if they have one it is to support their channel better)
This will reduce the Clickbait significantly and if they do not comply their Money from Ads are stopped.
May sound harsh but it will clean up a lot of crap on Youtube at the momebnt with it.
I would say Briscoe, Ozbourne and A Journey to Stocks are the best examples of how it should be done. Briscoe never recommends a stock but talks about the pros and cons of general investing as well as shows his own Portfolio, Ozbourne displays his Portfolio openly and talks about the stocks he is bullish on and AJTS is open about his positions and what he has made losses on, hw has a Patreon but has stated it will go back into the Channel.
I think if we had more of these YTers and none of the “THIS PENNY STOCK WILL 10X” or certain Youtubers who go on about being long in a stock but sell under a Patreon Video. If Youtube cut the wheat from the chaff then this will halt a lot of those who make money purely from the ignorant and buy stocks the Channels tell them to.