Stocks Only Go Up E-Book

Claude Kramer

• Herausgeber: BookThug
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 34

Veröffentlichungsjahr: 2020

Beschreibung

During 2020 the stock market was a "kangaroo market", with vertiginous and totally unexpected ups and downs. In a high volatility and liquidity context, there was an unprecedented increase in the number of retail investors, who started trading small amounts of money through zero-commission apps. Is this a new financial bubble about to burst? What role do apps like Robinhood, influencers like David Portnoy, and government stimulus checks have in this whole story? The answer is complex, but it is undeniable that something has definitely changed, and that something is access.

Leseprobe

1. A Revolution in the Financial World?

The stock market experienced very strange situations throughout 2020. Despite the pandemic causing unemployment and leading US to a recession, the stock market showed ups and downs but experienced a sort of boom. Or maybe it was a bubble being inflated, that is yet to be determined. Volatility was high, and so was liquidity. There was a huge increase in the number of retail investors, who started trading small amounts through apps that offer zero commission.

Robinhood being the most popular among these apps, the legion of young traders was called Robinhooders. Users belong to the Millennial or the Z Generation, they are very familiar with technology, they speak loud, use different social networks and want to make fast money. Much is being discussed about these young traders. Can they be responsible for the market’s rebound? Are they using stimulus checks to gamble with stocks? Do they even understand what they are doing? Are they being given leverages they can’t handle?

The suicide of a 20 year old Robinhooder who mistakenly read his balance and thought that he owed more than $700,000 brought the issue to the headlines. In the financial world, Robinhooders were already a topic, but analysts tended to underestimate their power and their influence. As pandemic months went by, many of them changed their mind and started considering the possibility that this new generations could indeed bring changes to the financial world.

Internet celebrity David Portnoy, founder of media empire Barstool Sports and part of the sports and gambling sector, also started day trading and live streaming his hours in front of the computer. Because of his popularity and his controversial statements, he was pointed out as the leader of the day trading boom, but he claims that he only jumped into something that was already happening. As in many other areas of life, it seems that COVID-19 pandemic accelerated a process that was already taking place.

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2. Pandemic, Quarantines and Day Trading Boom

Year 2020 will be remembered as an awkward year. The existence of a new virus was reported by the Chinese authorities to the WHO on the last day of 2019, even though there are still many doubts about the real origin of the virus and questions have been raised concerning how the Chinese government handled both the spread of the virus and the information. The truth is that a few weeks later, as travelers unknowingly contributed to the spread of the novel coronavirus, cases started to be reported in other countries.

A few weeks later, on March 11, 2020, with a total of 118,000 cases reported in 114 countries and 4,291 deaths, the WHO declared the coronavirus a “pandemic”. A pandemic is, by definition, an epidemic that spreads simultaneously around the world. By the end of March, most of the countries in the globe had to implement quarantines as the only way to stop the spread. Countries like Italy and Spain were already experiencing a collapse in their Health Systems. Schools were shut down worldwide, together with shopping malls, airports, restaurants, hotels and many more businesses.

The global economic crisis caused by the COVID-19 pandemic is unprecedented. Economists like the Spanish Santiago Niño-Becerra warn with horror that such a brake on the world economy has no comparison at least in the capitalist era1. Because all the previous world-wide economic crises in this capitalist era, be it the one of 1929 or the one of 2008, did not suppose a halt on the activity and the production, as the COVID-19 has done.

People being forced to stay at home, the use of Internet became a need. Activities that could no longer be done in person had to be done through the virtual: shopping, work, education, communication, entertainment. Of course the Internet was already widespread, of course Amazon, home office, Facebook, Netflix and distance education already existed, but with coronavirus they became the new normal and to most of the people, they became the only way to work, shop, teach, and so on.

In a New York Times article2