Just like real people, long-time students of the stock market have their favorite movies. Remember “The Graduate”, a 1967 romantic comedy? There is one scene early in the movie where Dustin Hoffman is cornered by a drunk (?) stockbroker at a cocktail party, who repeatedly whispers the one word “plastics”, suggesting that is THE future industry to be invested in.
The audience laughed at such a mundane, boring suggestion. However, market students laughed because that is so typical of “cocktail-tips”. Even in 1967, plastics was a twenty-year investment suggestion. It would be like a current recommendation to invest in “laptop computers”. It reflects the quality of cocktail-tips.
A recent cocktail-tip is “round-the-clock” stock markets. Cast in terms for fairness to the “working man” who cannot trade from the standard hours of 9:30AM until 4:00PM 5 days a week. A noble ideal, indeed!
But, it’s a bad idea!
Robinhood and Interactive Brokers are leading the way as a market-makers. Even more scary, “pink-sheet” companies, often less regulated and therefore less trustworthy, see 24-hour trading as a great opportunity to raise cash – whether fairly or unfairly. While we don’t have 24/7 online access to the normal, national exchanges yet, there is already some extended electronic-trading for certain stocks, starting at 4AM, ending at 8PM. Sounds great?
The lack of market transparency is a big problem. During the normal market hours, you have a close idea of how much you can sell or buy for a particular security. In the after-markets or per-markets, you don’t have that information. Is there room for market manipulation, you bet!
Telling somebody “don’t be a sucker, trade when others are sleeping” . . . is like telling teenagers its safe to stay out all night . . . what could go wrong in the dark?
In a hot-bull market, when I see billionaires start lining up to take advantage of “some new opportunity,” I like “plastics” even more . . .
The comments, thoughts, and emotions above are solely those of Jim Flinchum, not Bay Capital Advisors, LLC, not its officers, employees, nor friends.
