Quote:
Originally Posted by The Elkster
Institutional investors may own most of the shares on the market but retail investors can very much move the price. Just look at the recent runup with gamestop and blackberry. Also the acccidental runup in a startup when it was mistaken for another company that elon musk mentioned on twitter. There has been a huge ramp up in short term/retail trading in the last few years with the advent of no fee trading. The start of the pandemic has only made things worse as has the success of Tesla. The price of a stock is set by those actively buying and selling not those who are sitting back and holding no matter the size of those holdings.
Retailers are indeed managing to move the price and not in a good way. Its almost all speculation and not based on underlying value (see Dot Com 1.0). I've monitored the Reddit investing forums for a few years and there is almost a complete irrationality to their thinking. They'll find a company with a small scale good news tech story and create this fantastic narrative of how this thing is going to the moon. Anything with cloud computing, AI, Space is destined for greatness. They never talk profit margins, competition, cost of doing business, fickleness of customers...oh and low interest rates are alway's baked into the reason a massive P/E is very reasonable. Plenty of short trading and short squeeze plays being hatched as well. They are not investing they are in effect gambling and the cumulative effect is significant.
Its pretty scary to watch. I don't know when this will end but it is not going to go well.
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The retail trading is something I’ve noticed too. In the last few months I have been constantly bombarded with ads for no-fee trading. It’s non-stop.
I think there is an addictive quality to it as well. My Dad, who is 77 and has more than enough savings, is basically all in stocks now. This is how he spends his retirement time.