DealBook: How does this end?

Jay Owen Reforming Global Finance, SRI/ESG News

“So this is what I meant by calling public stock markets “the Global Casino“, accelerated by HFT and now internet gamers and day traders on Reddit!!  We tried to sound the alarm with our seminar on Wall Street, Nov, 2013 and report “Perspectives on Reforming Electronic Markets and Trading”, 2014.

 

Thanks to Andrew Ross Sorkin for tracking this insanity!

~Hazel Henderson, Editor “

Now worth more than $20 billion Frederic J. Brown/Agence France-Presse — Getty Images

Words of warning

Andrew here. Let’s have an honest conversation about the mania around GameStop — and its larger implications.  Is there something fun about watching the little guys beat the big guys at their own game? Sure.  But that assumes that the game is over. It isn’t.

The truth is that many of the small investors who look like winners after pushing up shares of GameStop could soon become losers, especially those who jumped into the frenzy in the past day or so. And unlike the wealthy hedge-fund managers on the losing side of the trade so far — who probably have more than enough money to cover the mortgages on their second or third homes, if they have mortgages at all — many of these retail investors can’t afford to take a big hit.

Remember when a 20-year-old Robinhood trader killed himself last June after seeing a negative balance of $730,000 in his account?  There is a risk that this trading mania has already gone too far. It looks divorced from any sense of reality or fundamental analysis. On the day GameStop more than doubled in price, the broader stock market recorded its biggest decline in months.

In truth, saying aloud that some small investors may not fully understand the risks they are taking is an invitation for scorn from an angry mob online. I know because I’ve been on the receiving end of it. And it is a fair argument: The markets shouldn’t just serve professionals and wealthy elites — and for far too long, the markets have been rigged against the little guy.

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