The misfits shaking Wall Street

Zane Bannink, a high school senior in Wisconsin, said that he has used the Robinhood stock trading app since he turned 18 two months ago. So far, he’s made over $800.

Jude Folmar, a 19-year-old college student in Dallas, said he’s been trading stocks since he was 13 under a custodial account his great-aunt helped him set up. He’s earned over $22,000.

And Liam Gavaghan, a 21-year-old university student in Kingston, Ontario, started trading about six weeks ago. He now spends hours scanning Reddit message boards focused on finance and talking to his friends about potential trades in a Discord voice chat room. He has made more than $9,000 on an initial investment of roughly $1,900 — money that he received as part of Canada’s COVID-19 stimulus relief package.

“It’s risky as hell,” Gavaghan said about trading stocks. “But holy cow, it’s almost like getting a high.”

In the world of high-stakes finance, these three entrants might have once been outliers. No longer.

They are part of a legion of young people — primarily male — pouring into digital trading floors in recent years, raised on social media and eager to teach themselves about stocks and trade quickly using an array of apps catered to Generation Z. In just a few short weeks, this new cohort of retail investors has completely upended some of the most professional traders by coordinating over social media, forums and chat rooms to trade shares of GameStop, sending the stock price for the video game company skyrocketing while leaving a number of sophisticated short-sellers holding the bag.

Their motivations run the gamut: Many are unapologetic, cash-seeking capitalists. Some consider themselves idealists, would-be 99 percenters who were too young to occupy Wall Street in the movement’s heyday. Some are nihilists who simply want to tear down a system they feel is rigged against them from the start. Then there are those kids just doing it “for the lulz.”

What many of them have in common, though, is that they buy and sell equities regularly, right from their smartphones, while posting their gains, or “tendies,” to online forums, all out in the open for their peers to see. They often view the trading as a sort of video game, similar to chasing a new high score on a puzzle app or accumulating likes on an Instagram post.

Their impact on the market has been nothing short of extraordinary. GameStop’s stock has seen violent swings, with daily percent increases jumping into the triple digits. Pressure on investors who had previously “shorted” the stock — a bet that the price would drop — nearly bankrupted at least one hedge fund. Elon Musk, the world’s richest person, has made the group of Redditors his cause célèbre, cheering them on in a series of tweets this past week. At the same time, numerous Wall Street analysts railed against the traders, arguing that they had made a mockery of the markets.

The blowback against them has even made for strange bedfellows in Washington. Politicians on both sides of the aisle united briefly in their contempt for Wall Street’s response to the young traders.

All the while, the band of misfit traders continued laughing — all the way to their digital banks.

“I’m just sitting here on Reddit, looking at the numbers grow up and up and up,” Gavaghan said, marveling at the enormous gains the GameStop stock has made in the past few days.

The young traders are propelled, and empowered, by technology. Companies like Robinhood, a trading app aimed specifically toward market newbies, advertise across social platforms, enticing young users with no transaction fees, immediate access to instant deposits and a fun, user-friendly interface. On Thursday, Robinhood said it was raising more than $1 billion to grapple with an extraordinarily high volume of trading.

And they turn to online communities to talk stocks and strategies with one another, on platforms like Discord and Reddit, most notably on the forum r/WallStreetBets. The foul-mouthed, meme-heavy group debates stocks and discusses trades in a way that feels native to many high school and college students.

Daniel Uribe, 21, a college senior in San Diego, said that he discovered WallStreetBets five months ago after a YouTuber he follows, named Big Boss, made a video about the group.

“I wanted to be part of the excitement,” Uribe said. He figured he might be able to make some cash, too. “There’s a lot of stuff that the older generation doesn’t realize even exists. We have different ways of making money that they don’t understand.”

WallStreetBets is by no means all young people. The demographics of the Reddit forum, which now has over 6 million people, are broad and encompass out-of-work boomers, earnest millennials and hyper-online children. However, the camaraderie in the community is something many young traders said they were drawn to.

The forum has its own language. They refer to winnings as “tendies,” and it’s customary to celebrate a large gain by dining on chicken tenders. WallStreetBets investors praise those who have so-called diamond hands, meaning they hold their stock or continue to invest even when the stock price dips.

Having diamond hands is seen as a form of bravery, even if it sometimes appears irrational, and investors celebrate such resolve with diamond and hand emojis in their comments. Conversely, having “paper hands” is seen as a sign of weakness or cowardice, and indicates a willingness to fold or sell stock after a dip. All of this in-crowd lingo spills across the web to YouTube, TikTok, Snapchat and more, becoming memes within memes.

Louis Weimer, 20, a college student in Pittsburgh, signed up for Robinhood as soon as he turned 18, like many of his peers. He liked that it didn’t charge huge fees and allowed him to trade small amounts of stocks, key for a college student on a small budget. He put $200 in it that he’d amassed from working at a grocery store and bought stocks in companies that he recognized, like Apple and Microsoft.

WallStreetBets had been on his radar since the beginning. He came across the community on Reddit and checked it on and off to keep track of trades. Weimer said that he and his friends would often discuss stocks. “Both of my roommates here at school, they’ve got investment accounts and we talk about our trades all the time,” he said.

Like many traders his age, Weimer has never been taught anything formally about the stock market. His information is gleaned from the internet and conversations online. He learns through watching YouTube videos on how to diversify a portfolio or when to time a stock buy.

Bannink, the Wisconsin high school senior, said he had friends who had been trading throughout high school under their parents’ accounts, posting about wins and losses to Snapchat and Instagram, and he wanted in on the action.

With Robinhood, “you’re able to put it on your homescreen and flip between Instagram and Snapchat; it doesn’t feel as serious as it used to,” he said. “It’s just an app you open up on your phone, there’s graphs, and numbers, and it’s easy to understand and learn really quickly.”

Folmar, the 19-year-old in Dallas, said many minors had found ways to bypass the age restrictions on the trading apps.

“It’s very easy to get past that 18-year-old requirement,” he said. “You can take a picture of your mom or dad’s Social Security card and set up an account.”

Many young traders get their information from the video app TikTok, where financial advice and stock trading tips often go viral, reaching tens of millions of users.

“TikToks suggesting which stocks are good to buy, explaining what’s going on with GameStop, and explaining the stock market as a whole, have come up on my ‘for you’ page,” Bannink said. “When I don’t understand something going on I just hop on YouTube and look up a video and there’s almost always multiple videos explaining it pretty clearly.”

“In the next few years, as more of us are turning 18, a higher percentage of people are going to start investing on their own,” he said. “You can download an app and put it next to the other apps you go to on your phone every single day. It becomes a lot easier to just do stuff yourself.”

Bannink said that traders like him were different from day traders of the past. Losing all your money, after all, stings much less if your general lifestyle doesn’t change and you’re still living at your parents’ house.

“We’re more of a fearless group of traders,” he said.

Many young users on the WallStreetBets forums have complained that no matter what they do, the deck is always stacked against them. Many say they seek to expose the entire financial system for the game that it is. Meme stocks are part of that. Some will hype up a novelty stock or trade it as a stunt.

“You know how we have memes that become super popular and everyone uses them for a while, then they crash?” said Zaid Admani, 29, a financial TikTok creator in Texas. “Those stocks are like that.”

Although most Gen Z traders were too young to remember many details of the 2008 financial crisis, they witnessed the impact of it on their families. Some saw their parents lose their job or their house, and have watched those older than them struggle for years to make ends meet. They are hyper aware of income inequality and the disparities in access to wealth in America.

“Everyone who is my age has grown up with some different type of understanding of money because of 2008,” Weimer said. He said that he and others his age felt frustrated that they weren’t ever given a chance to even get a leg up.

“It should be an even playing field,” he said. “Anyone can do their own research, it’s all fair game, so why should the system be so favorable to people who have more money?”