In November, 2019, 25-year-old Chlöe Swarbrick, a member of New Zealand’s Parliament, popularized the phrase, “Okay Boomer,” when she used the dismissive comment to shut down an older colleague who had interrupted her as she spoke on climate change.
Today’s stock market equivalent comes courtesy of 43-year-old Dave Portnoy, the founder of Barstool Sports, a sports and pop-culture blog. In a recent tweet, he wrote, “I’m sure Warren Buffett is a great guy but when it comes to stocks he’s washed up. I’m the captain now.”
Portnoy, who reportedly had virtually no stock market experience prior to the COVID-19 pandemic, has become the poster boy and unabashed champion for a new generation of day traders. With no live sports to watch, he has been firing up his base of 1.5 million Twitter followers by telling them of his latest stock conquests, even live-streaming his trading as “Davey Day Trader Global.”
Buy the dip
This year’s stock market volatility has attracted millions of new investors traders. Robinhood, a relatively new player in the space that at first was mobile-only, was the first to introduce no-commission trading, and has become especially popular with millennials, added a whopping 3 million new accounts in the first quarter of 2020.
Even traditional brokers, at least those that have recently gone no-commission, have seen surges of new account openings as well. Fidelity added a record 1.1 million accounts in the first quarter. The company’s trading volume doubled versus the first quarter of 2019, with buy orders outpacing sell orders by 50%.
Schwab added 609,000 new accounts in the first quarter, while TD Ameritrade added 608,000 — a three-fold increase over the first quarter of 2019 — and E-Trade gained 329,000. The biggest month for new accounts was March, when the market hit the bottom of a -35% plunge from its February 19th all-time high.
Why all the interest in the stock market at a time of high volatility? Market watchers cite a variety of factors, from the recent introduction of no-commission trading at many brokers to the boredom of being stuck at home, possibly aided by the government’s stimulus checks hitting the accounts of many who didn’t really need the money and may have been inclined to speculate a bit with it instead.
Others point to a sense that the February-to-March sell-off represented a “generational buying opportunity.” But it isn’t just beaten-down shares of popular technology stocks that are generating interest. The stocks of companies in some stage of bankruptcy — Hertz, JC Penney, Chesapeake Energy, among others — are seeing a surge of interest as well, showing just how aggressively opportunistic some investors are being.
Still others believe many of the investors who left the stock market during the 2007-2009 bear market, and missed the 11-year bull market that followed, are finally getting back in. Fear, it seems, has been supplanted by the fear of missing out.
What could go wrong?
Whatever the reason, today’s new market participants represent both a threat and an opportunity. The threat is that these aggressive new players have the potential to lose a lot of money.
For those who know even a little bit of market history, it’s easy to see comparisons between today’s newly-minted market enthusiasts and those who got on board in the late 90s.
The opportunity rests with experienced investors — perhaps parents or grandparents of a young person who has been drawn into the market recently. If the newer investor is open to some input (and they might not be), consider bringing some biblical teaching into the conversation:
The wisdom of diversification (“But divide your investments among many places, for you do not know what risks might lie ahead.” – Ecclesiastes 11:2)
The importance of taking the long view (“Steady plodding brings prosperity; hasty speculation brings poverty.” – Proverbs 21:5)
And, if you can handle the conversation carefully, the dangers of greed (“Then he said to them, ’Watch out! Be on your guard against all kinds of greed; life does not consist in an abundance of possessions.’” – Luke 12:15)
Remember, no matter how out of touch us "Boomers" (and X’ers) may be perceived to be, the Truth of God’s Word is timeless.
Some may have to learn the hard way
Years ago, in my pre-Christian days, it was pretty common for me to bet when I played golf. I still remember one round when I played with a friend who was a much better player than I was. When the amount I owed him started piling up, I kept doubling the bet. And I kept losing. When the round was over, I owed him a lot of money. But he had mercy on me and said to forget about it.
The market is not merciful. In fact, it’s disturbingly indifferent to anyone who treats it like a slot machine.
By the same token, and at the risk of sounding like a Boomer (ahem!), for those who adhere to the principles of diversification and patience, who manage the more difficult task of keeping their emotions in check, and who invest for all the right reasons, investing in the stock market is a reliable way to build wealth.
Regarding that last point, I like what SMI founder Austin Pryor wrote in a free downloadable resource we have available on our site, 7 Key Principles for Christian Investing: “I have become convinced that it is ultimately impossible to self-destruct financially if your decision-making is pointed in the direction of God’s glory.” It’s when our decision-making becomes pointed toward our own glory that all bets are off.
