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As a New Retail Trader Age Rises, Heed Tales of Past Manias

In spring 2020, the temporary closures of professional sports leagues during the initial coronavirus pandemic lockdown, coupled with the infusion of fresh capital into financial markets by the Federal Reserve and US Treasury, anointed a new class of retail traders in financial markets. This wave of new market participants brings with it a wave of liquidity that had been otherwise out of the reach of traditional financial markets.

While the past few months may have been exhilarating for retail traders it is a good time to look back into history for some informative cautionary tales from other retail manias in financial history. Here is a look at past events, emotions and drama that led past traders to seek fortune from similar environments only to leave many struggling with the subsequent ruin.

In capital markets, liquidity will always find its own level. Financial capital will flow into the coffers of even the most insolvent companies when there is an abundance of liquidity. Consider the example of Hertz. Read more…..

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My guest today is Ray Dalio, Founder, Co-Chairman, and Co-Chief Investment Officer of Bridgewater Associates, the fifth most important private company in the US, according to Fortune magazine. According to Forbes, he is the 69th Richest person in the world, and he has been called the “Steve Jobs of Investing” by Wired magazine, and named one of the top 100 Most Influential People by TIME magazine.

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