It’s something I’ve been saying for decades, even while Wall Street’s control over our economy and politics has grown.
Wall Street is becoming an app. You can trade stocks with no commission. You can learn what’s going on at no cost. All those fancy degrees and expensive midtown offices that have driven markets for 150 years are worthless. It’s all one big casino.
The Gamestop kerfluffle is just a proof point. Thousands of small investors, many using discussion boards on Reddit, bought a stock that big Wall Street hedge funds had shorted, and drove one of them to the wall.
Chamath Palihapitiya, whose Special Purpose Acquisition Companies (SPAC) will eventually cost small investors billions, because they’re pushing a lot of garbage onto the market on his say-so, is nevertheless one of the movement’s big cheerleaders. He wants basic reform. He wants to limit the amount of leverage Wall Street hedge funds can bring to a trade. He wants to limit how much of a company’s stock can be sold short.
These are reasonable reforms. But to hear CNBC host Scott Wapner tell it, Chamath is leading a revolution, and people are going to be hurt.
They are. You can be as wrong buying Virgin Galactic as you are shorting Gamestop. That’s the way markets work. And in this bull market, which will break down (don’t know how, don’t know when), the rules are different.
In this bull market, anyone can play. It’s a story I’ve been covering for a decade now, most recently at InvestorPlace and in my own retirement fund. That’s all Chamath is saying. The problem for Wall Street is that he’s being proven right in a short-term trade meant to destroy a company.
I can analyze a company and write about it as well as any Wall Street pro, and I’m just a reporter. But you don’t have to be a reporter to do what I do. I advise my readers to use the one ingredient no one owns, time, to boost their chances of a return. The cloud can’t keep a stock up, or down, for many years. Eventually it does come back to its fundamental value. Analyze where that will be, based on the changes taking place in the real market, and let time do its magic.
The guys at Reddit aren’t using time, and some of them are going to be burned as a result. But they know that. They’re not going to be asking for a bailout if they lose. Wall Street will be, and it’s been bailed out too many times. In 2008, and in 2017, Washington threw trillions at Wall Street and Wall Street ran to the dog track with it. Wall Street promised to create jobs with it. They didn’t. They just built a casino that was “heads I win” and “tails you lose” with it.
What the economy needs now is demand. More demand, more opportunity, is what will take the market fever down. It’s what will take price-earnings ratios down, the idea that you can make money, with safety, somewhere else. A lot of small investors will be burned when that starts to happen. I hope I won’t be one of them.
But if I am, I won’t be demanding Washington bail me out.
