SYLVIE DOUGLIS, BYLINE: NPR.
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DARIAN WOODS, HOST:
This is THE INDICATOR FROM PLANET MONEY. I'm Darian Woods.
WAILIN WONG, HOST:
And I'm Wailin Wong. If you've seen the news coming out of Wall Street over the last couple of months, you might have felt a keen sense of deja vu.
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UNIDENTIFIED NEWS ANCHOR: Roaring Kitty is back.
KEITH GILL: Can y'all hear me right now? I kind of forget how to do this (laughter).
UNIDENTIFIED NEWS ANCHOR: Shares of game stock soaring today, at one point jumping 110%. It's reminiscent of...
WOODS: It's like we're back in 2021 at the height of the meme stock frenzy - you know, the WallStreetBets forums on Reddit and these young day traders gleefully upending financial markets.
WONG: Oh, yes. And you might remember Roaring Kitty aka Keith Gill aka one of the biggest figures during the GameStop mania. He went quiet for a few years. Now he has recently resurfaced. But it turns out lots of amateur investors who followed him into the markets never left.
WOODS: That is according to financial journalist Nathaniel Popper. He's the author of a new book called "The Trolls Of Wall Street: How The Outcasts And Insurgents Are Hacking The Markets."
NATHANIEL POPPER: My book is basically about how we got this new generation of mostly young men who are obsessed with the markets and trading and money. And I was just fascinated by the question of where this whole new generation of trading came from and what it means.
WONG: Today on the show, why Nathaniel believes these day traders are here to stay and where they're putting their money now.
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WONG: Nathaniel Popper spent almost a decade at The New York Times covering the intersection of Wall Street and Silicon Valley. And he says before the meme stock frenzy of the pandemic, the last boom in individual trading was during the '90s dot-com bubble.
WOODS: But these two episodes are very distinct. For starters, the meme stock boom was driven by young people. They got accounts on platforms like Robinhood, which made trading feel as fun and accessible as a mobile game or social networking app. Nathaniel says teenagers as young as 13 were signing up on Robinhood.
POPPER: That totally changes the dynamics of the trading because it's young people with all the sort of, like, adrenaline and risk-loving tendencies. And in the 1990s, you know, the fact that it was sort of generally middle-aged and older people made it a much more sedate affair.
WONG: There was nothing sedate about the GameStop saga or about the massive influx of money that flooded into the market in 2021. Nathaniel got original data from a firm called Vanda Research. This company tracks nonprofessional individual investors, aka retail traders, and it can distinguish their activity from trading related to investing in retirement or mutual fund accounts.
WOODS: The data from Vanda Research showed that in the first half of 2023, amateur traders put $118 billion into stocks. That's roughly the same amount that flowed into stocks in early 2021 during the GameStop mania. And it's more than quintupled the level of amateur stock trading pre-pandemic.
POPPER: What you see in these numbers is that ordinary Americans buying individual stocks has stayed at this incredibly elevated level even after the pandemic ended and everybody went back to work. This is really young people, and particularly young men, and they are trading in a way that sort of previous generations of retail traders did not.
WONG: So what's kept these young people in the market years after the initial excitement around meme stocks? Nathaniel points to three big reasons. Number one is the sheer entertainment factor. He says day trading is like the new reality television. And meme stocks made for a riveting inaugural season of this reality TV show.
POPPER: These meme stocks was sort of the gateway drug, I think, for a lot of people. It was, like, the first source of entertainment that drew people into the markets.
WOODS: Nathaniel says just like social media gives you that dopamine hit when you refresh a feed, there is an addictive quality to this kind of investing. Sports gambling has also gotten really popular among young men in the last few years, and Nathaniel sees a connection between these different forms of entertainment.
POPPER: The markets essentially provide, like, a better version of that feedback mechanism, that feedback loop that social media gives us, which is that you can just, like, keep checking back, and something has changed. And just that little bit of change is enough to keep us coming back for more, I think.
WONG: So that's the entertainment factor. And Nathaniel says the second big reason these young investors have stayed is a sense of community. WallStreetBets is still one of the largest forums on Reddit, with 16 million members.
WOODS: Nathaniel says the world has grown past Reddit to include chat platforms like Discord. By one estimate, last year there were 24,000 different Discord communities where millions of members discussed investing.
WONG: And the last big reason that Nathaniel sees for amateur investors to stick around is that a lot of them did actually make money, or they realized that investing over a longer term was likely to generate returns.
WOODS: There were plenty of horror stories of day traders getting wiped out, especially if they had made risky bets on things like cryptocurrencies. But overall, Nathaniel says the bull market of the early pandemic paid off for a lot of these new investors.
POPPER: The Federal Reserve does these surveys. And what you see is that the wealth being held by younger generations has been going up faster than it has for other generations because their stock holdings have gone up so much.
WOODS: And as these new investors have stuck around, they've also grown up a little, and they've started to shift what they put money into. Nathaniel says he's seen some traders move away from the super risky speculative trading that marked the initial meme stock frenzy. There's more interest now in big, reputable tech companies like Apple.
WONG: Do we all just get, like, more boring as we age? Is this what's happening?
POPPER: We certainly all get more boring as we age. I think that's true. There has been much less of a move towards, like, GM and Ford. You've seen a lot of interest in tech stocks, particularly AI stocks like Nvidia. So to the degree that they've gotten more boring, it's still been this bet on the fact that things are changing faster than old people understand.
WOODS: Nathaniel traces a lot of the ideology of these young investors back to the Great Recession, Occupy Wall Street and a distrust of the financial system. That's partly what made it so entertaining for these young upstarts to see rich hedge fund investors getting squeezed during the GameStop mania. He says it's possible this ideology might now also be evolving.
WONG: If there's this, like, underlying distrust of institutions, then it would make sense to me that you're like, I'm just going to extract as much as I can from this, like, broken, exploitative system. Like, I'll play you before I get played, right? If you're now thinking about like, OK, what companies do I believe will create, like, shareholder value over the long term? That's kind of, like, inadvertently becoming part of the system.
POPPER: Yeah. Part of what's so interesting is that people have gotten into the markets, and then they have gotten this, like, unexpected education in how the markets work and how the economy works. And you're right that I think that that has made people over time look a little bit more like traditional investors.
WOODS: But this group of traders is still their own generation with their own ideas of what they want to do. Bloomberg recently reported that amateur investors are increasingly trading overnight on apps like Robinhood. This activity is disrupting traditional U.S. trading hours and could potentially generate more volatility.
WONG: Young traders could also be a force in the U.S. presidential election. In his book, Nathaniel documents the overlap between some members of the WallStreetBets community and Donald Trump supporters during the 2016 election.
POPPER: Well, I think the fact that Roaring Kitty and GameStop have come back at the same time that Donald Trump is making his own comeback is not an accident. They both come out of this trolling culture on the internet, where everything is both a joke and deadly serious at the same time.
WOODS: So it looks like all Wall Street bets are off when it comes to what these traders will do next.
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WOODS: This episode was produced by Angel Carreras, with engineering by Cena Loffredo and Valentina Rodríguez Sánchez. It was fact-checked by Sierra Juarez. Kate Concannon edits the show, and THE INDICATOR is a production of NPR.
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