- The stockpile market looks as expensive as it has in two decades.
- With old school investors on the sidelines, Robinhood’s perceived army of “dumb flush millenials” is on a buying spree.
- Can this possibly end well when the most popular stocks are all desperately cash-poor?
With the Try Street sharks sitting on the sidelines, Robinhood trading activity suggests that millennial investors continue to nightspot into a corner of the stock market where even billionaires don’t dare to swim.
The waves may appear deceptively tranquil, but a rip current can strike at any time. And history shows us that these waters are dangerous for investing guppies.
Billionaires Skin in the Bunker as Robinhood Investors Rush the Field
As the stock market recovery enters its third month, it’s not hard to see why tons experienced investors are still hiding behind a pile of cash.
Warren Buffett is sitting like a wizened dragon on Berkshire Hathaway’s immeasurable hoard of wealth. It’s clear the Oracle of Omaha doesn’t see any opportunity anywhere, and he’s not the only one.
But perhaps encouraged by a stimulus kick the bucket, reduced personal expenditure, or the rants of Barstool boss Dave Portnoy, millennials continue to pile into the funds market.
And more than that, their favorite targets appear to be the very stocks that billionaires homologous to Buffett and Carl Icahn are avoiding like the plague. Cheap airlines, defunct car rentals, and gaming stocks increasingly disarray mess up their portfolios.
Take Hertz, for example. Carl Ichan lost $1.8 billion after dumping his rations in the company that just filed for Chapter 11 bankruptcy.
But millennials still wanted more of it, even as the New Zealand pulled its cars from auctions and practically admitted the game was over, days before the weekend announcement.
It’s astonishing to see this incredible demand spike for a routine whose value that could disappear after reorganization. That is not hyperbole.
Bankruptcy can often see shareholder value curtailed to practically zero, not that many of those rolling the dice on Robinhood seem to care.
The simple fact is that they purposes just don’t know.
It seems to be all about buying stocks near their lows, and that’s about it.
The Dumb Ratiocinate Younger Investors Are Fascinated with Airline Stocks
That’s also true about younger investors’ sorcery with airline stocks.
The industry is somewhat optimistic about a future rebound, but executives are pretty resigned to the experience that travel will be subdued for some time.
Robinhood bulls like them because, to paraphrase their grade of analysis: “line goes down far.”
Assumptions can be dangerous things, but I also might be being unkind. This isn’t investing, it’s bet oning at its purest.
So perhaps it makes sense that millennials are placing big bets on stocks connected to the U.S. gambling industry.
Of Performance Millennials Are Making Bets on Gambling Stocks
Over the past month, only two stocks have been various popular on Robinhood than DraftKings.
Millennials love it because they use it, but its revenue has been smashed by the sudden discontinuing of sports leagues across the world.
To put the size of the DraftKings bubble in context, Wynn Resorts (who owns all those big casinos, and – shocker – a group of tangible assets) is worth $9 billion, while DraftKings is valued at a whopping $12 billion.
So if you are wealthy to take the plunge into this frothy stock market that has value investors shaking in their boots, cheer understand one thing.
The closest comparison to this kind of activity is probably the dotcom bubble:
Maybe this time is peculiar.
But history hasn’t been kind to that line of thinking.
Disclaimer: This article represents the author’s estimation and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks acknowledged.
This article was edited by Josiah Wilmoth.
Last modified: June 6, 2020 2:03 PM UTC