Online trading has deeper roots than we think: Nathaniel Popper

The social media comeback of Keith Gill, also known as "Roaring Kitty," reignited a slight resurgence of the meme trade phenomenon. Joining Asking for a Trend to discuss his outlook on the role of "trolls" in the markets is Nathaniel Popper, journalist and author of "The Trolls of Wall Street."

Popper explains that online trading has "much deeper roots" than many people realize. He highlights that millions of individuals are "obsessed with the markets," and the meme stock craze was just a case study for this passion. Popper notes that the meme trade phenomenon brought millions of new investors into the markets, but they eventually broadened their horizons, realizing that "there are smart investments and there are dumb investments."

However, Popper suggests that market participants can learn from their mistakes and losses. "What you see over time is, when you see people losing, you have an opportunity to learn," he told Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode.

This post was written by Angel Smith

Video Transcript

According to a Thursday post on Reddit, Keith Gill A K A Warren Kitty is now one of gamestop's largest shareholders.

The Redditor who helped spark the meme stock craze share.

He currently holds more than 9 million shares of the video game retailer.

And that stake leaves just three other investors in front of him, Black Rock Vanguard and gamestop, Ceo Ryan Cohen's investment firm.

But let's take a step back before this latest memes meme rally was ignited before the Gamestop surge of 2021 and take a look at the subreddit that helped start all Wall Street bets.

Nathaniel Popper is a journalist and the author of the trolls of Wall Street, how the outcast and degenerates are hacking the markets and he joins me now, Nathaniel.

It is great to see you.

You know, it's interesting, Nathaniel, the, the meme stock craze.

I bet there are plenty of folks who thought, you know, this is fun.

It's entertaining, but it, it's gonna fade.

It's gonna come and go.

But you know what?

It's June 2024 Nathaniel and we are still talking about it when I started writing this book about the, the trolls as I, as I call them, you know, I have to say, I, I didn't think it was going to be alive in quite this way.

Uh uh You know, when I actually finished the book, um but you know, what I saw what made me want to write a book about this new world of online trading and investing is the fact that this had much deeper roots than most people understood.

And it was much more broad based in the markets.

And there are just millions of young American, particularly young men who are obsessed with the markets and that, you know, people keep thinking that's gonna go away, but it hasn't gone away because it's bigger than I think people understand.

And, and are, are there differences Nathaniel between, let's say now and 2021 that you see in terms of the trend and the theme and as you point out, you, you would argue it's broadening.

Yeah, I mean, I think it's funny that right now we are once again paying attention to meme stocks.

Meme stocks are certainly a part of this.

But since 2021 you know, since that moment in 2021 when gamestop first really took off, uh you've got, you've gotten millions of more people into the markets and what's happened over time is that they've actually j in, in broad terms, moved away from the most speculative plays and from meme stocks.

So meme stocks have become actually a smaller portion of the retail action over time.

What I trace in my book and what I find so interesting is that this retail crowd, you know, they're often called the Dumb Money, but they've sort of learned over time, they figured out that there are smart investments and, and dumb investments and they've generally moved in the direction of smart investments.

And so, even though, you know, meme stocks are a part of it, they've actually become a smaller part over time.

I'm interested Nathaniel, you know, II I got a buddy.

He, he was used to be a trader at Goldman and he once told me, you know, I'm not any smarter than the retail trader.

I just have much, much better tools.

Hey, that, that counts for a lot.

And I guess I'm interested Nathaniel when, when you know, you're talking to the folks you're you're talking to for your book, some of them are making money but you know, are, are, are a lot of them making money.

I mean, do we have any kind of line of sight?

There, there are a lot of interesting new data sources coming online that give us some insights into that.

And what I the the the data I find the most interesting looks at the aggregate sort of retail position in positions in individual stock.

So this is taking sort of retail traders and removing, removing the mutual funds, removing retirement investing, just looking at individual stock purchases.

And when you look at that portfolio over time, they have done in a a according to Vander research, which is one company that tracks this in in really interesting detail that that retail portfolio has done better over time than the S and P 500.

You know, the the classic way to think about.

Are you beating the market?

Is, are you doing better than uh than the indexes and retail have at most points outperformed the indexes over the last 10 years, over the last five years, over the last three years.

Now, that may be an artifact of this moment in the markets when, you know, sort of speculative future looking companies, you know, A I companies, Tesla Electric car companies have been doing well, but, you know, the retail crowd has taken risks and it's paid off in broad terms.

Now, of course, there have been sort of these, these uh tremendously sad stories, big losses.

You know, when you go on Wall Street bets, I trace this all through the community, Wall Street bets, you know, losing, being honest about your losses was a big part of the allure and the appeal of Wall Street bets.

But what you've seen over time is that when you see people losing, you have an opportunity to learn Nathaniel, such a great, super interesting conversation.

I wish we had more time.

But thank you so much for joining the show.

Nathaniel.

Appreciate it.

Thanks for having me.