The retail traders driving the meme stock frenzy are “here to stay,” but the current rally in shares of AMC Entertainment is not, said Karl Roessner, the former chief executive officer of E*Trade, in an interview with CNBC.
“This is not going to end well,” Roessner said of the AMC rally. “I think historically we we’ve seen this in the past, but I do believe this group has staying power.”
Shares of AMC jumped as much as 27% Monday following a record week in the stock that was largely driven by retail traders on Twitter and Reddit.
AMC, the world’s largest movie theater chain operator, became part of a new trend of so-called “meme stocks” earlier this year when retail investors on Reddit threads, most notably Wall Street Bets, began pouring into certain stocks like GameStop in order to squeeze short sellers.
Wall Street Bets since has ballooned into an army of retail traders numbering more than 10 million users.
In the interview with CNBC, Roessner, who is now the CEO of Lefteris Acquisition Corp., said with the availability of social media and trading platforms, the group has “powerful tools” at their fingertips, giving them “staying power.” Apps like Robinhood, WeBull, and Public, have grown in size amid interest from new investors.
He said his own sons, who both have E*Trade accounts, have picked up on investing.
“They keep hitting me as to, ‘Why don’t we own any dogecoin, or why don’t we get involved with one of these meme stocks?’ And I always bring it back to fundamentals,” he told CNBC. “Then they hear from their friends that they just made $10,000 on dogecoin, and they’re going to take the rest of the summer off. So how do you combat that?”
He said educating in financial literacy is key. For example, all of the money retail traders are investing in hyped up stocks should be risk capital, he said, because there’s a chance a person could “lose everything.”
“I always worry about the last retail trader who’s left holding the bag when the music stops,” he said, noting the last retail traders to invest during the internet bubble or before the market crash that prompted the Great Recession.
With regard to AMC specifically, Roessner said he applauds management raising capital to address balance sheet problems. But overall, “Absent some serious strategic undertakings by that company, it’s still just not worth what it’s trading for right now.”
If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at email@example.com.
Some have said the app makes investing too much like a game, as others complained of market manipulation amid the GameStop frenzy.
The situation has allowed competitors to muscle in.
WeBull, the Chinese-owned brokerage that launched in 2017, said it saw a 16-fold jump in new account signups following the Robinhood backlash, Bloomberg reported at the time. Meanwhile, Public, which also launched in 2017, has doubled in size year-to-date with more than 1 million users.
These trading apps are all competing for attention from Millennial and Gen Z investors alongside more established brokerages, like TD Ameritrade, Fidelity, and others.
For this story, I downloaded each of the three apps to compare the user interface, the variety of features, security, and the educational resources, to see which one came out on top.
The bottom line? Robinhood was hands down the most enjoyable to use and interact with, but WeBull came out on top with readily available data and resources to help me improve my investing strategies.
My view as a first-time retail investor
I will start by saying I’ve never done this before. I started my professional journalism career at Bloomberg and am now the Millennial Investing reporter on the markets team at Insider. Those roles come with strict rules on what I can and can’t do in terms of investing.
For example, I write a lot about meme stocks like GameStop and AMC. If I were to invest in one, that would be a conflict of interest and would land me in hot water with my employer. Besides contributing to a 401(k), I’ve stayed away from any other investing.
To open accounts with each of the apps, I had to answer a lengthy list of questions, from my investment experience to a lot of personal identifying information, and then input my banking information. This experience is standard across all services.
Though I did not claim the offer, all of the apps I tested award users one free stock as a perk of signing up.
Also, importantly, all of these services are commission-free. This is the case for both stocks and crypto on Robinhood and WeBull, while Public does not offer crypto trading at this time.
I see why Robinhood has been described as “gamifying” investing. The app is well-designed and exciting.
My retail investing journey began with Robinhood. I got the go-ahead to transfer exactly $1 to my new brokerage account to invest in an exchange-traded fund. I chose the Vanguard S&P 500 ETF, which trades under the ticker VOO.
With $1 in buying power, I received .002602 shares, the app said. I swiped up to submit the purchase. It said my order was completed and showed me a summary.
When I clicked “Done,” a full-screen graphic appeared saying, “Congrats on making your first trade, Natasha!”
As someone who writes about markets for a living, this was extremely fun. If I’d had more than $1, I would have clicked the shiny green button on the bottom that read, “Continue your journey” to buy more.
I started to understand how young people could become addicted to an investing app.
Public made the buying experience just as easy. Instead of the bright white-and-green color scheme on Robinhood, Public has a sleek black-blue-and-white design.
I easily found the Vanguard ETF, input my $1 of buying power, and clicked “confirm.” No confetti, but it was straightforward and easy.
WeBull was more of a challenge. I transferred my $1 from my bank account only to discover the app doesn’t offer fractional trading, meaning I had to buy a whole share, which would have cost $386.91 as of 2:45 p.m. on Friday.
The discovery was a let down. I would either have to find an ETF trading at $1, which does not exist, or transfer more money for something more expensive.
I decided on a single share of the Financial Select Sector SPDR ETF, trading under the ticker symbol XLF, for $37.54.
After transferring more funds, I hit the blue “trade” button on the ETF’s main page, input the quantity as 1, and hit “confirm.” It brought up a receipt page that read “working” and would allow me to cancel or modify my order in the meantime. Again no fireworks, but a relatively simple process.
WeBull has everything a young investor would need – except fractional trading and a fun user interface
If you overlook the lack of fractional trading, which can be a great way for investors to own otherwise prohibitively expensive stocks, WeBull felt like the most serious investing app. Here’s why.
First of all, it had the most security features. I opted to set an unlock pattern for each time I open the app. On top of that, when I decide to go into my brokerage account within the app, I have to enter a six-digit pin.
It felt like bank-level security, which is something I found important out of a broker that has all of my personal information and bank account details.
Robinhood and Public have security features, too, just not as many. Robinhood requires my phone passcode each time I open the app. On Public, I opted to turn on the face-ID feature for more security.
WeBull also provided the most market data.
Though the deluge of data meant the app wasn’t as sleek as Robinhood, it also meant I had more access to important information before investing.
That’s not to say Robinhood and Public don’t have market data. They do (on Robinhood investors can pay $5 for a subscription to market research and level 2 data), but neither app has near the amount of information WeBull provides up front.
In terms of educating young or new investors, WeBull also wins. The app regularly sent me messages with how-tos on investing and explainers on topics like initial public offerings.
There wasn’t much for educational resources within the Robinhood app. Public offered some. All three gave access to relevant news articles.
WeBull also had a social media feature, where users can share their views and investments.
Public, though, has a much more visible social aspect, and markets that as a selling point. Its slogan is “Public makes the stock market social,” and it recently launched a live audio feature, similar to that of the Clubhouse app.
Among the apps, investors have to choose among a sleek and exciting platform with Robinhood, a less sleek yet more informational app in WeBull, or a social-media driven platform in Public.
Overall, my experience would lead me to choose WeBull if I was in the market for a trading and investment platform.
Americans are now holding a higher percentage of their net worth in stocks than ever before, the Wall Street Journal reported on Monday based on data from JPMorgan and the Federal Reserve.
US households increased their equity holdings to a record 41% of their total financial assets in April.
Nikolaos Panigirtzoglou, an analyst at JPMorgan, released the findings from data going back to 1952 that includes 401(k) retirement accounts. The analyst said appreciating share prices coupled with increased buying were the main factors for the elevated allocations.
The news comes just two weeks after FINRA announced margin debt – the amount of money investors borrow from their brokers – hit another record high in March, topping $822 billion.
The rise in interest in equity markets and the use of debt to invest in them comes amid a boom for retail traders.
New apps like Robinhood and Webull have taken the market by storm, adding millions of new investors and traders over the past few years.
Robinhood has grown so much it was able to more than triple the revenue it earns from payment for order flow in the first quarter of 2021.
The rise in revenue from active trading came after Robinhood added some 3 million new members in the first quarter of 2020 alone during the height of the pandemic, per Bloomberg.
A new study from the University of Western Australia found that trading activity among retail investors spiked during the pandemic as investors had more time and money to invest in online trading.
Robinhood and other trading apps have repeatedly graced the top of Apple and Google’s app stores amidst the meteoric rise in retail trading.
And while many market commentators are cheering the inclusive move, some have issued warnings.
Warren Buffett warned about the self-confident nature of Wall Street and the new breed of retail investors in Berkshire Hathaway’s annual shareholder meeting on Saturday.
“We were just as sure of ourselves, and Wall Street was, in 1989 as we are today. But the world can change in very, very dramatic ways,” the ‘oracle of Omaha’ said.
The dollar index, a measure of the US dollar against a basket of six currencies, was trading at a two-and-a-half year low this week. Positive news on COVID-19 vaccine development has raised hopes of a swift economic recovery and eroded safe-haven demand for the dollar. Congressional Democrats coming out in favor of a $908 billion stimulus package may also weigh on the US currency.
Webull CEO Denier believes a weak dollar is good for Bitcoin because the Fed’s policy of printing money, thereby devaluing the dollar, will make people use the token as a haven from inflation.
“If people are pulling money out of gold and putting it into Bitcoin, that could give more fuel for the Bitcoin rally,” he said.
Simon Peters, analyst at multi-asset investment platform eToro
Peters said eToro saw a 66% increase in the number of people holding a Bitcoin position on its platform in November, compared with the last time it hit an all-time high in December 2017.
He pointed to some indicators that suggest Bitcoin could go higher still.
“If we maintain the current rise, then $25,000 before the start of 2021 is on the cards,” he said. “There will be some selling at $20,000, and this could see a short move backwards. But if bitcoin shrugs off this selling and continues rising, then New Year’s Eve at $25,000 is there for the taking.”
Glen Goodman, author of bestselling book ‘The Crypto Trader’
Although Bitcoin has doubled in price in just a couple of months, it could easily fall just as fast as it did after the last boom, according to Goodman.
“All the talk of ‘Tulip Mania’ in the 2017 boom is absent now. Once the historic Dutch tulip bubble burst it never recovered, while Bitcoin has now shown it has real staying power,” he said.
The author, who is a contributing expert on cryptocurrency at the London School of Economics, said the “Maisie Williams Indicator” is a great gauge to measure where the level of interest lies.
The Game of Thrones star recently conducted a poll on whether she should buy Bitcoin. Most of the million voters said no, but at the peak of the last Bitcoin boom, most voters in a CNBC twitter poll said yes to Bitcoin at precisely the wrong time, Goodman noted.
“The lesson is: whatever the herd’s doing, it often makes sense to do the opposite,” he said.