Financial experts ushered in the democratization of the stock market with the founding and subsequent IPO of Robinhood.
The app that enables stocks, options and crypto trading from your phone is said to be new in Wall Street history.
It is not.
Individual access to trading in securities and raw materials has developed over many market cycles.
I won’t go back on the point by going back to the founding of the New York Stock Exchange in 1792, but I’ll go back about 100 years.
The Roaring ’20s, the great bull market that lasted for nearly a decade, were known for infamous “bucket shops” that invited people on the street to trade at margin. That said, investors borrowed from their brokers to buy stocks.
Historical reports vary widely on how many people bought and sold stocks in the 1920s. Many were burned to death in the 1929 Great Crash after buying on Marge and losing their stake.
Speculation in the stock market by individuals reached historic proportions in the 1960s. The era of “go-go” mutual funds shaped star money managers like Gerald Tsai, who ran the Manhattan Fund; Fred Carr, who ran the Enterprise Fund; and a young Peter Lynch at Fidelity Investments.
Of course, the 1960s were followed by the volatile 1970s, when individual investors, similar to the 1930s, lost interest in the stock market.
However, on May 1, 1975, the government deregulated the fixed commission fees on Wall Street, leading to the rise of discount brokerage houses. This made it cheaper for individuals to buy stocks, and it’s one of the most recent examples of the democratization of stock trading.
Trading volume exploded as costs fell.
As markets began to recover from stagflation in the early 1980s, Wall Street, much more so than Main Street, saw a roaring bull market that lasted until the 1987 crash.
In the 1990s, lower interest rates, reduced taxes, and a wave of technological innovations hit Silicon Valley and Wall Street. A new boom began, which led to another mutual fund mania. In this environment, technologically sophisticated discount brokers like Ameritrade brought online trading to Main Street.
When in 1995 with the advent of America Online, Netscape, and Yahoo! As the internet bubble began to inflate, day trading has become a national pastime.
Numerous investors traded in hot dot-coms, regardless of whether they were profitable, generated income, or even had a product that was ready for the market.
This market was “democratized” only to wipe out many traders and investors when the bubble burst in 2000.
The last time shareholdings peaked, around 65%, according to Gallup, in 2007, when individuals traded shares on Wall Street and houses on Main Street.
The 2008 financial crisis has drawn this group of investors right up to this latest episode of what we call “democratization” again.
The Robinhood crowd, coupled with the Reddit rebellion, has made day trading both profitable and fashionable again, with very little attention paid to the story of speculative episodes like this one.
This isn’t the first time the kid sees Wall Street leveled, and it won’t be the last.
But like everyone else before that, it will likely fall back in favor of the pros, hitting the newly freed in their pockets.
Nothing is free and nothing lasts forever.
The game never changes, as a Wall Street veteran of the 1920s told me decades ago – only the faces do.
Remember that if a new face shows up and claims, you are now free to make your fortune.
—Ron Insana is a CNBC employee and senior advisor at Schroders.
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