There have been moments of market euphoria in the past, moments when stocks stop being a serious mechanism for the allocation of scarce capital, and start being a fun, positive-sum casino.
There have also been moments of national crisis, with tens of millions on the unemployment rolls and an implacable enemy killing hundreds of thousands of innocent Americans.
- Never before have we seen both at the same time.
Driving the news: For people who like to look at daily movements in the stock market, the past week has been thrilling. Stocks went down quite a lot, led by tech stocks in general and Tesla in particular, and then yesterday that story was reversed.
- Between the lines: While almost $2 trillion was wiped off the value of Nasdaq stocks alone, they nearly all remained above their pre-pandemic highs, which gave the whole episode a feeling of unreality.
- Traders are effectively playing with the house's money — except when they take profits to buy a house, or maybe a $3.9 million baseball card.
Between the lines: While day-traders were making $1.5 million mistakes trading Kodak stock, Japanese tech giant Softbank was buying not only $4 billion in public stocks but also options with a notional value of about $50 billion more. That trade was worth more than $4 billion before the market downturn, and could have been big enough to move the market on its own.
- The other side: Tesla took advantage of the frothy market to sell a whopping $5 billion of stock between Sept. 1 and Sept. 4. That's real money — more than 20 times as much as it raised in its IPO in 2010.
By the numbers: Retail investors now account for 19.5% of all stock trading, according to market-structure guru Larry Tabb. That's up from 14.9% last year.
- Financial products are being revamped to become more retail-friendly. Tesla, for instance, split its stock price to seem more affordable, while the CME options exchange has introduced "micro mini" options to make the market more tradable when the mini options were still too expensive.
The big picture: While retail investors betting a few thousand dollars might be small fry by Wall Street standards, they're still relatively big fish in a country where the median annual income is $40,000 per year, and where an income of $70,000 puts you in the top quartile.
What they're saying: Japanese billionaire Yusaku Maezawa lost more than most on his day-trading activity — and understands that it wasn't play money. "With ¥4.4 billion [$41 million], how many people could the money have been given out to and saved?" he tweeted. "There's no end to this regret."
R.I.P.: Financial anthropologist David Graeber died on Wednesday. "In this final, stultifying stage of capitalism, we are moving from poetic technologies to bureaucratic technologies," he wrote in 2012, urging society to "break free of the dead hand of the hedge fund managers."
- The irony is that the stock market itself has now become a poetic technology. The hedge fund managers may be less important than ever, but market capitalism retains its iron grip on society.