Gravity is gone

“So I’ll meet you at the bottom if there really is one
They always told me when you hit it you’ll know it
But I’ve been falling so long it’s like gravity’s gone and I’m just floating.” –
Drive By Truckers

When the Fed and its brother or sister—central banks such as the European Central Bank, the Bank of England, and the Bank of Japan—engage in zero or negative interest rate policy and multi-trillion-dollar balance sheet purchases of financial assets, multiple “moral hazard” market interventions for more than a decade, to quote another great song from T-Bone Burnett, “Sometimes falling feels like flying, even for a little while.” However, every now and then, there are events that can jolt us—even if just for a moment—into reality. One such “event” is what is going on at the Silicon Valley darling, Robinhood.

In the late 1990s dot-com boom when young people who actually knew how to log on to the scary new thing, the internet, were opening accounts with online trading firms such as E-Trade and Ameritrade and becoming day traders, buying and selling “hot stocks” with dubious or just outright insane business models. As we know this ended complete disaster. Now that the on-line brokerage model has matured and dominates retail equity investing, we have a new iteration, Robinhood. According to a recent New York Times article,

Robinhood’s average customer is young and lacks investing know-how. The average age is 31, the company said, and half of its customers had never invested before.

 

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