Retail Investors Are Seduced by Meme Stocks, but the Emperor Has No Clothes

HoOOowWww appropriate! (*sung like Alanis Morissette*)

Meme stocks have taken over the investing landscape, but they hardly represent financial empowerment for most retail investors. As a Princeton professor points out, less than 1% of day traders are able to beat the market, thus illustrating how profoundly rigged the game is against the 99%. Meme stocks are no different—the early adopters tend to make out like bandits while everyone else is left holding the bag. By the time stock mania hits the media, it’s already too late. 

Don’t piss on my shoe and tell me it’s raining

As we’ve mentioned, Robinhood is “dependent on online trading frenzies” and selling user trading data is 81% of their business. In fact, Robinhood seems to greatly benefit from high volumes of vacuous trading. These surges delight Wall Street as well, since Robinhood trades are routed through Wall Street’s mega brokerages. Funny that, eh? 

It just takes one tweet from Elon Musk or another public figure to send meme stocks surging to new heights or plummeting to the ground. Yiiiikes. Rampant speculation based on hype is no substitute for actual business acumen. Investing money into a stock that’s so deeply influenced by Elon’s moods and whims is incredibly risky, to say the least. Robinhood’s deception has since been exposed, and regulators punished them for “widespread and significant harm” to consumers. When emotion is removed from meme stock plays, it’s basically raccoons in a trenchcoat. Double yikes.

Off with their heads

With a system structured so that America’s wealthiest 10% own 92% of stock market gains and 300 million unaccredited investors are shut out of Wall Street, it’s no surprise retail investors are seeking alternative entry points into the market. It’s easy to understand why novice traders are eager to enter the fray when they hear stories about regular people making thousands of dollars from meme stocks in the news. Desperation and frustration permeate the 99% who have been left to deal with the fallout from two “once in a lifetime” recessions, a freaking pandemic, wealth inequality worse than during the French Revolution—which widened by nearly a trillion dollars during said pandemic—the looming consequences of climate change, and the alarming socio-political discord. 

Look closer to notice the mirage

It’s great that attention to meme stocks has brought more eyeballs and interest to the market, but like most things, educating yourself is supremely advised. We know that ‘regular investors’ should be perfectly capable of choosing their own investments, but it’s impossible to win against a system engineered to screw the little guys (and gals) over. For the overwhelming majority of day traders, it’s “guaranteed slaughter” regardless of what action they take. But, don’t despair—all is not lost!

There are Federally-regulated investment environments like DigitalAMN’s PAI Ecosystem which offers equity crowdfunding—among other opportunities—for everyone else. The PAI allows retail investors to access investments pre-IPO, receive ownership stake and fund startups they believe in. This kind of community impact is tangible and is part of something bigger. While it can be fun to ‘stick it to the man’ by squeezing the shorts via social collusion, perhaps the better way to hit the establishment where it hurts is to drastically reduce their play time by eliminating the need for the industry’s gatekeepers. It may not feel as exciting in the short run, but long term, leaving to play in another sandbox is the shrewest way to avoid falling directly into Wall Street’s trap and upending an oppressive socio-economic structure. 

Join the DigitalAMN PAI Ecosystem—Find out more or email info@digitalamn.com

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