The Stock Market Is Now a Casino

This item first appeared on from Concoda

Many people will call me crazy for even reporting on the Wall Street Bets (WSB) community. It’s a forum for “alternative finance,” giving the popular expression “dumb money” a whole new meaning, a trading-related subreddit with no stringent rules apart from no “What should I…” posts, no pity parties, and no glorifying losses. Everything else, on the other hand, goes. WSB is lewd, crude, and one to avoid if you’re easily triggered, but if you need validation that you’re a decent human being, it’s well worth a visit from time to time.

After stomaching or flat-out ignoring the inevitable bad behavior — and god knows what else that happens in an unregulated subreddit— you will witness some of the craziest stock market bets out there. WSB is the place where casual traders ditch the concept of responsible investing. Safer investments like bonds, gold, and real estate are boring — throw them out the window. This subreddit is all about making the most outrageous “stonk” bets on the planet, where individuals gamble hundreds — if not thousands — of dollars speculating on “meme stocks” ranging from popular companies like Netflix ($NFLX) and Amazon ($AMZN) to “contrarian” picks like $JNUG: the risky, high-beta Junior Gold Miners ETF and $WEED: the cannabis company with a market valuation of $7 billion.

Why does this subreddit exist, you might ask? Well, WSB is the result of a responsibility crisis within millennials caused by “lower for longer” monetary policy: Zero interest rates and rock-bottom bond yields have caused the death of savings accounts and the birth of a “live fast, die young” culture within personal finance. Why save money for your retirement when you can Y.O.L.O your life savings — or stimulus check — shorting Tesla or going long Amazon in the midst of an economic crisis?

There is a common phrase on WSB: “Live by the dip, die by the dip,” which rings true in the current market environment. Since the sell-off starting on February 22nd, volatile conditions have provided Redditors with constant action as traders start to believe buying the dip might be a losing strategy. This has created a surge in ultra-risky bets, both bearish and bullish, that if successful, reward traders with four-figure percentage gains. Reddit user, futuretrollshark, is one of the beneficiaries, making a million-dollar in profit after gambling $500k on ($AMZN) Amazon call options. He, however, is in a minority whose gamble pays off. Most WSB traders lose their shirts. Some via bad luck, some via utter stupidity. Some are even willing to lose five-figures just for a laugh. Take Reddit user, Lil-woozy-vertwho blew $20,000 on <1% chance outcome betting that the S&P500 would fall over 40% in 24 hours, or Reddit user j_kouzmanoff who bought $780,000 of S&P500 puts betting on a market collapse after the crash had already occurred.

But it’s not just reckless Y.O.L.O bets that show the stock market is hitting peak-gamble mode. You know things are crazy when Barstool Sports CEO and avid gambler, Dave Portnoy, makes the switch from sports betting to day trading. Of course, he’s down $640,000 in a matter of days.

If you’re bored during the lockdown, what better way is there to pass the time than blowing $500,000 trading stocks intraday? Or, in the spirit of WSB, watching someone else do it for free. Day trading is notorious for being the most unprofitable form of trading, and the statistics prove it: 70%-80% of traders using CFDs and 96% of foreign exchange traders lose money. As a beginner, believing you’re going to walk away from the stock market rich with odds 9-to-1 against you, is like rocking up to spelling bee with a 3rd-grade vocabulary — poor Dave nonetheless.

As long as we remain in this loose monetary policy environment, reckless-style investing will continue to grow in popularity along with the WSB subreddit — while the nation’s savings rate continues to plummet. It’s definitely a “do not try this at home” strategy and more of a spectator sport. One to dodge especially during the lockdown as our mental health takes a turn for the worst.

The only thing I’ll be doing on WSB is sitting back, relaxing, and watching the mayhem unfold, distancing myself from the most extreme form of financial armageddon. It’s clear, after being an active member for four years and more, that following any OP’s advice on the craziest trading forum is a sure-fire way to lose all your money — pronto.

The views represented in this commentary are those of its author and do not reflect the opinion of Traders Magazine, Markets Media Group or its staff. Traders Magazine welcomes reader feedback on this column and on all issues relevant to the institutional trading community.