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I finally got around to reading the New York Time's explosive take on Robinhood and the emergence of wild day traders.
I have some comments about it. A thread
I have some comments about it. A thread
1. If you look back at market history, you will find this is a story that has been repeating for 100+ years.
There have and always will be risk takers and new traders diving in without any clue to what they're doing. But, no one knows what they're doing when they start.
There have and always will be risk takers and new traders diving in without any clue to what they're doing. But, no one knows what they're doing when they start.
2. Buffett, Dalio, Simons, they all started like a crazy kid on Robinhood betting the farm on pot stocks. Then, over time, they learned and got better. Or lucky.
It's an expensive education. But it's not going anywhere. What's changing are the platforms and their accessibility.
It's an expensive education. But it's not going anywhere. What's changing are the platforms and their accessibility.
3. History is filled with moments where retail trading popped off like your first college party.
In 1929, the market was roaring and everyone wanted in.
During the South Sea Bubble of 1720, even your great uncle Charles with scurvy was buying stocks.
The list goes on.
In 1929, the market was roaring and everyone wanted in.
During the South Sea Bubble of 1720, even your great uncle Charles with scurvy was buying stocks.
The list goes on.
4. The thing that separates each of these moments in history is the way people got access to markets.
In 1720, people were gathering in local parks and trading from park benches. In 1929, they were gathering at a trading floor.
Today, you trade from your phone, from anywhere.
In 1720, people were gathering in local parks and trading from park benches. In 1929, they were gathering at a trading floor.
Today, you trade from your phone, from anywhere.
5. The Dot Com bubble of 1999 was the first time retail trading went online in vogue. People were getting giant desktop computers that looked like microwaves and their first Internet connection that made beeping noises each time you turned it on.
500,000 online trades per day.
500,000 online trades per day.
6. Today, there's a bigger rise of trading apps accessible from anywhere. There are several billion online trades per day.
What I'm saying is, little Joey, the future market millionaire, installs an app and trades while playing Xbox. This wasn't possible until a few years ago.
What I'm saying is, little Joey, the future market millionaire, installs an app and trades while playing Xbox. This wasn't possible until a few years ago.
7. More people than ever have access to markets and can route buy orders instantly.
In 1929, you were buying stocks because your neighbor next door said "Good day sir, this company makes the best top hats, you should walk to your broker and inquire."
Orders travelled slowly.
In 1929, you were buying stocks because your neighbor next door said "Good day sir, this company makes the best top hats, you should walk to your broker and inquire."
Orders travelled slowly.
8. Now we share ideas through text, on apps, with links, screenshots, posts on social media, and on our Twitter accounts.
News travels faster, downloads travel faster, buy and sell orders travel faster.
The platforms are better than they've ever been and they're in your pocket.
News travels faster, downloads travel faster, buy and sell orders travel faster.
The platforms are better than they've ever been and they're in your pocket.
9. So you can blame one app or you can blame them all, but the point I'm trying to make is that this is not new, it's only become more extreme because of the accessibility.
If Robinhood was not around, we would be talking about someone else. The cycle is inevitable.
If Robinhood was not around, we would be talking about someone else. The cycle is inevitable.
10. When I got started trading in 08, I was using a platform that was trying to combine gaming with trading called Kapitall. Wtf was I thinking? Exactly.
I was not the first to start like that and I won't be the last. I have no idea where this ends, but it's fascinating to watch
I was not the first to start like that and I won't be the last. I have no idea where this ends, but it's fascinating to watch
Here's the NYT story this thread is based on: https://www.nytimes.com/2020/07/08/technology/robinhood-risky-trading.html
If you want to hear my thoughts on markets right now, here's a blog post I recently published: https://scheplick.com/2020/07/08/welcome-to-market-mania/
Thanks for reading.
Also I would end this tweet with something like "don't do dumb things with your money" or "manage your risk" but the simple fact is neither of those statements will stop the cycle of speculation and wild trading or investing. I mean we just made sports gambling apps legal
Here’s a must-see tweet to add to this thread.
At the moment, retail trading is accounting for 25% of all trading volume.
25%!
https://twitter.com/macrocharts/status/1281269850921369600?s=21 https://twitter.com/macrocharts/status/1281269850921369600
At the moment, retail trading is accounting for 25% of all trading volume.
25%!
https://twitter.com/macrocharts/status/1281269850921369600?s=21 https://twitter.com/macrocharts/status/1281269850921369600
