The year 2021 is just a month old, but the global financial markets are very busy. U.S. President Joe Biden successfully took office, the market is expected to launch its 1.9 trillion U.S. dollars bailout, support the global market liquidity to maintain abundant, asset price bubble feast can continue. However, the stock market bubble white-hot, at the same Time bring a new phenomenon, the recent rise of a network of retail forces in the U.S. stock market, picking up the traditional financial forces is an example! Is this the “last days” phenomenon of asset bubble extremes, or is it the rise of the Internet economy under the Epidemic, the power of the Internet to open a new chapter of global financial reform?
Last Thursday (28th), a brokerage firm to restrict the hot speculative stock trading, disguised as “unplugging wires / network” to call a halt to the action of the retail investors, attracted the retail investors group fierce criticism; the U.S. government is also concerned about the impact of related crazy speculative actions.
In fact, if this kind of crazy speculation behavior continues to expand, it will bring several problems. First, the short-selling institutions are held light positions, huge losses may cause these financial institutions to collapse, affecting not only the short-selling institutions, but also the relevant brokerage firms and banks that provide loans.
Second, when this network of retail investors successfully hold short positions in more and more cases, such as the performance of a wealth transfer drama, capital strength will continue to rise, the target will also be upgraded from small stocks to medium-sized stocks, the impact on the overall market volatility will also increase accordingly.
In addition, in fact, this kind of hold light action, depending on the supply of individual stocks and demand, is a game of numbers, and the basic factors have nothing to do with the purely capital-driven, such as gambling games. Development continues, the number of fluctuations become more and more frequent, and more and more large-scale, so for the overall financial market order may turn into a disaster!
Asset bubble to the extreme is like gambling
Originally, investing in stocks is to invest in the company’s business growth, drive asset appreciation, and achieve long-term sustainable investment returns for shareholders. But whether short-selling institutions short-selling behavior, or the network of retail investors to hold a short position behavior, often deviated from the basic factors of the company, using the supply and demand of individual stocks to make profits, the final valuation will inevitably have to be revised.
However, there are also individual examples that can grasp the opportunity of stock price fluctuations. For example, the recent AMC targeted by the retail investors, the film business itself was hit by the epidemic, has been on the verge of bankruptcy, it is said that the company is considering to take advantage of the rapid rise in share prices to raise capital, may be able to tide the company over the difficulties.
The new army has risen to enjoy the right time, the right place and the right people
In fact, there are several reasons for the successful “emergence” of retail investors in this round. First, an epidemic that has lasted for more than a year has restricted traditional economic activities with measures such as gathering bans and shutdowns, and has boosted work-from-Home, leisure and investment behaviors, resulting in a significant increase in Internet penetration.
Second, the U.S. government’s cash handout to residents to alleviate the plight of the recession under the epidemic provided a “silver bullet” for a group of retail investors, although individually limited in amount, when discussed through the Internet and strategically gathered in certain targets, it had an effect, and they did not care to “lose” in order to hold the big players hostage. “.
Third, the U.S. government continues to print silver paper bailout, the effect of stimulating the economy has not seen too much, but it has intensified the asset bubble, many Americans who have never speculated in stocks are running to open accounts, anyway, the economy is too poor, “business is thin, it is better to gamble. So see the last six months the U.S. stock iterations of record highs, even the fairy junk stocks, shell stock prices are speculated up, all because the market is more money, speculation is also more people, after all, the U.S. stock entry threshold is low, a share can also be traded.
Fourth, in fact, the recent “GameStop event”, a network of retail investors successfully “uprising” key, is the use of small stocks “hold short positions” effect to make a name for themselves. The first is that the value of these small stocks is not large, in terms of supply and demand patterns, suitable for retail investors to attack; the second is that once successfully set off a hold short position, “forced short” to fill positions quickly push up the stock price, retail investors are like a “Jackpot”, win a lot of money.
The collective behavior of these network retail investors, but also in the challenge of traditional short-selling institutions by “short selling” dance high to get low stock boy’s practice, more participants feel such as “playing financial big brother” action is “challenging “, attracting more and more young investors to participate.
Regulatory intervention or not, there are divergent views
The market believes that the emerging power of the network of retail investors, such as to the traditional financial forces to “pick the machine”, or because of market manipulation and potential lawsuits, by regulators or traditional financial institutions such as brokerage firms and banks to suppress. Many investment celebrities have criticized retail speculation as a madness that will eventually lead to “a shell of tears”. However, the network of retail investors also have their own views, the market circulation of an open letter from retail investors to short-selling institutions, showing that the financial tsunami after the central bank to print money to save the market, aggravating the disparity between the rich and poor caused by public grievances.
In fact, it is rumored that the hedge fund Point72 founder Cohen, who lost 15% this year due to his investment in Melvin Capital, suspended his Twitter account last Saturday (30) after he said his Family was threatened.
Recent Comments