We’re seeing a ‘move towards democratization’ with GameStop saga: SS&C ALPS Advisors President

SS&C ALPS Advisors President Laton Spahr joins Yahoo Finance Live to discuss the latest market action as Reddit users turn to silver.

Video Transcript

- I want to shift it back over here to the market, as we are seeing, again, all three major indices here in the green, but still a lot of question marks about today's moves in silver and what it could mean for the broader market. So let's bring on our next guest here. Laton Spahr is SS&C ALPS Advisors president.

And he joins us now. Laton, appreciate you taking the time here to chat. I mean, you just heard from Congressman McHenry there, as we look at the market moves around this retail investor trade, what do you make of what we've seen so far on the strength of that move and what it means for the broader market?

LATON SPAHR: Yeah, that conversation you just had was fascinating. And you know, I love hearing the perspective around diversity and transparency for financial markets. You know, I think a lot of what we're seeing in silver, and what we saw last week with GameStop and some of these volatile moves in what I would call narrowly defined stocks or assets, in the case of silver, is that this move towards democratization is something that I think is all good. Right?

I mean, over the last couple weeks, there's a debate about anarchy and who's lost money, who's making money, who the good guys are, who the bad guys are. I mean, really what happens, markets are these complex adaptive systems. And when you lose diversity, and then all of a sudden some new idea comes into the market, prices move a lot. And that's what's happening with silver. It's what happened with GameStop.

But what we're seeing is more diversity, more transparency, new ways of communicating. And I think that's all good for markets. It's also enhancing financial literacy across the board. I've had more conversations from people that are not typically engaged in markets over the last week who want to learn about options, they want to learn about volatility, they want to open accounts and learn this stuff firsthand.

So you know, it's fascinating. I don't think the moves are signs of any corruption or negativity in that regard. So you know, I think power to the people, as you ended the prior interview, is a great theme for the month.

- Having said that, we have had a number of guests on who sort of highlighted their concern about whether, in fact, this trade could spill over into the broader markets. It's one thing to have a lot of volatility around a stock like GameStop. What about a stock that has a heavier weight on the S&P 500, for example? How real is the contagion risk? Do you think it's a bit overstated?

LATON SPAHR: I definitely think it's overstated. I mean, when I look at what causes risk in the markets, it's whenever there's some crowded opinion by a relatively small group of investors that is proven wrong or is challenged by a new perspective of diversity. And when you look at the largest market cap names, there's so much diversity of opinion that's in a Microsoft or that's in a Caterpillar that names like that just are less vulnerable. Now, there are themes around them that can take, you know, really any stock or any theme to extremes, but that's something we've seen forever.

I mean, it's fun to talk about silver today and then put it in the context of 1980, when the Hunt Brothers first tried to-- when they tried to corner the silver market. And you think of, you know, what technologies existed then and the financial vehicles that they tried to use. There isn't anything new about this.

And I think the idea that it's a contagion risk and that financial regulation really has no bead on this is a-- it's a fairly narrow perspective of something that just took the oxygen out of the headlines last week. But there isn't anything new here, other than the technology. And the technology is just improving the way that we can bring diversity and transparency to markets. And when you have opinions change, prices move.

- Yeah. And Laton, too, I mean, when we're backing up, and before we were really talking about GameStop every day, we were talking about earnings, and those had been strong relatively across the board, but the stock reactions have been pretty weak to those. So that was kind of the story before we got sidetracked into this. But what do you make of that? Because a lot of people are pointing at the fact that, if you are seeing a weak post-earnings pop, it doesn't look good for the market.

LATON SPAHR: Yeah, so I mean, we ended last year on a very high note, right? The fourth quarter returns were among the best fourth quarters we've seen. You know, the euphoria around equities was at technical highs. You know, you look at the different indicators of options and optimism from a behavioral standpoint, and we were at very, very optimistic levels coming into this year.

And as you go through earnings season, I mean, we've seen this over the last several years, that in between earnings seasons, the market tends to consolidate around big macro themes. And then we hear from all of these companies, and we realize that the recovery or the nuances of the fundamentals are much more complex. And you can't just make big broad-brush assumptions about where markets are going.

And I think over the last four weeks, we've heard from banks and industrial companies and technology companies, consumer companies, it's not all just roses, right? We're still in a really difficult recovery from this COVID recession, and it's not a straight line up. And then you add in the headline risks and the volatility that we've seen from the GameStops and from silver, and it's just caused people to take a little profit, take some money off the table. But we do think that the stimulus story is still in place. The cyclical recovery story is still in place.

And we've been talking about buying the dips. And that's exactly what last week was. We still think there's a lack of inflation that's going to motivate more stimulus. And we think the gradual improvement from vaccinations and from policy opening back up, it's still the theme for 2021. And weeks like last week are great opportunities to step back, look at exposures, and understand what's been missed. And there are still opportunities in this market at exposure.

- Laton Spahr, SS&C ALPS Advisors president, it's good to talk to you. Appreciate your time.

LATON SPAHR: Thank you.