Trading Through the Pandemic

On this week’s Animal Spirits, Ben made the case for traders being more educated and better behaved than they were in the past.

This line of thinking was plucked from an article by Rob Walker, who got some interesting quotes from one of the cofounders of Robinhood:

For more than a year prior to the current crisis, the company was focusing on people who had registered for the service, but hadn’t used it to buy any stock, essentially asking: What’s preventing you from getting in the market?

“One of the most common answers we got is that people thought it wasn’t a good time to buy. They thought the market was too expensive,” Bhatt says. And in the last couple of months, that’s changed. “There was this large audience of consumers…that had been looking for an opportunity to jump in at a moment when the market was, according to them, at a better price.”

I see the quote, but I just don’t think that’s what actually happened. After the market crashed they were locked at home with nothing to do. Young traders dove head first into the market because they saw other people, their friends and most notably Dave Portnoy doing the same. And the names they were most likely to buy, the high-fliers, just so happened to go on one of the most epic runs ever. In short, they got lucky.

I’m not hating on young investors. I think it’s great that they’re getting involved and learning the rules of the game. But this idea that they had planned on investing but were waiting for a better entry and then calmly bought the mother of all dips? Sorry but I’m not buying it.