These are the riskiest days in recent memory, in terms of social cohesion, public health, and the economy. But many millennials and Gen Zers are doubling down on risk and using their time in quarantine to day-trade stocks. The major online brokers Charles Schwab, TD Ameritrade, Etrade, and Robinhood report new accounts grew 170 percent this year. The brokerages claim that their new account holders “skew younger.” Robinhood, whose average client is 31, says it added 3 million new accounts in 2020.

Part of the phenomena is traced to Barstool Sports’ Dave Portnoy, who hadn’t done much investing in financial markets. But, like other entrepreneurs whose businesses—in his case, talking about professional sports, which have been placed on hiatus—were hit by the lockdown, he reinvented himself, and is now a self-anointed investment guru. He even questioned the Oracle of Omaha, tweeting, “I’m sure Warren Buffett is a great guy but when it comes to stocks he’s washed up. I’m the captain now.”

The New York Times speculates that the sudden drying-up of the sports betting market is the reason why Portnoy, and his millions of fans, turned to stocks. But not everyone is happy about having so many enthusiasts pursuing their new hobby. Market commentators are blaming these new investors for a stock market that keeps rising (and then falling), despite a dismal economy. The amateur speculators are even credited for increasing a bankrupt Hertz’s stock price five-fold.

Concern that the new, inexperienced traders are distorting markets is absurd, however. There are no precise estimates of how much money the newbies are investing in stocks, but in 2018, the entire sports-betting market was estimated to be about $155 billion. That may sound like a lot, but it’s nowhere near enough to explain recent stock volatility: it’s less than the amount traded through the New York Stock Exchange every day, never mind the $30 trillion or so in stocks held by American financial institutions. It is probably safe to assume the entire sports-betting market has not turned to online trading, but even if it has, not every new day trader is buying and selling the exact same securities.

It’s hard to see how small day traders could move the market when they are such a tiny part of it. But even if they could, larger traders, with (allegedly) more skill and experience, would take the opposite position (sell when the amateurs are buying, and vice-versa) and return prices to normal. The fluctuations in Hertz’s share price most likely came from the activity of more sophisticated investors hoping to get in line for a payout when the company’s assets are liquidated. A more plausible explanation for volatility—both in the case of Hertz and across the market—is extreme general uncertainty about the economy, and a forward-looking market banking on a recovery.

The personal finances of the new traders are a more legitimate concern. If the past is like the future, most of these new traders will probably lose money. Beating the market consistently is nearly impossible. Even experienced active investors, who claim to be good at it, complain that it’s gotten harder to make money when they are competing against ultra-high frequency traders, who use computers to analyze data and trade faster than any human possibly could. A 25-year-old frustrated sports fan trying to predict the direction of the market will stand even less of a chance, and could wind up in serious debt, especially if he is buying shares on margin.

But this phenomenon may be a positive development. Josh Brown, of Ritholtz Wealth Management, thinks it’s a good learning opportunity. These would-be high-flyers will discover how hard it really is to make money in the markets. In the best-case scenario, they’ll only get lightly burned, grow frustrated, and start buying index funds, or shares in quality companies for the long term, instead of gambling on sports or stocks.

Photo: P. Kijsanayothin/iStock

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