Business Week just ran an article (How Stocks Became the Game That Record Numbers of Americans Are Playing) that nicely brings together a number of thoughts that have been bouncing around in my head for a while. The essence of the article is that the U.S now has a culture of speculation and gambling-what an economics professor at William and Mary called a “gambling zeitgeist.”
•We have frequent flirtations with meme stocks that explode in price for no fundamental reason. These surges are the product of social media and internet investing gurus.
•Wall Street has created high octane new products such as Bitcoin ETFs, fractional share ownership of artwork, and zero-day options.
•According to Charles Schwab, members of Generation Z start investing on average at age 19 as compared to 32 for Gen X and 35 for Boomers.
•60% of Americans own stocks, the highest number on record. The percentage of the average portfolio invested in stocks is just below the all-time high reached in 2000.
•Transaction costs are essentially zero and trading is digitally enabled.
•In the past five years, Americans have wagered more than $220 billion on sports.
I have mixed feelings about all of this. On the one hand, beginning to save at an early age is a major step forward in dealing with America’s retirement problem and the high level of stock ownership will be rewarded over time. On the other, all of this has taken place during a roaring bull market when making money was relatively easy. What will happen when we experience the inevitable downturn? I am also concerned that investing has been gamified becoming a source of an adrenalin rush rather than a serious attempt at building one’s financial future. My concerns may well label me a dinosaur; perhaps I just don’t get it! But, then again, I have experienced a number of cycles as well as several manias which leads me to reiterate the importance of keeping your wits about you.