“‘Jumping the shark’ is a TV term for shows past their prime that try gimmicky storylines to keep viewers. The reference, derived from a 1977 episode of “Happy Days” when Fonzie water-skis in his signature leather jacket, applies equally to the media conglomerates responsible for such productions.”
Read more: Supersized media M&A haunts Netflix’s next act.
Going with the flow
There was a time when many stock market players viewed retail investors with irritation. I can remember chief executives grumbling about the expense of accommodating hordes of pensioners at annual shareholder meetings, while bankers muttered about the hassle of having to cater to mom-and-pop punters as well as big fund managers. No longer. Individuals are exerting ever-greater influence on equity markets around the world. The question is whether, once again, their timing is off.
The phenomenon has spread well beyond the United States, where almost 60% of households owned stocks directly or through funds in 2022 – a figure that has surely risen since. Roughly one in four of all Koreans are active investors, encouraged by the soaring value of the country’s two leading chipmakers. Indian punters have helped to make the country’s equity derivatives market the largest in the world. Even Europeans are warming up to share ownership.
Much of this investment is sensibly pooled in funds and index products. Yet buyers of individual shares and other investment products are a growing force. SpaceX SPCX.O reserved 20% of its record stock offering for retail investors. Robinhood Markets handled 74% more trades in May than a year earlier. U.S. options trading is at record levels. A lot of this activity involves following market trends. As Edward Chancellor points out, these so-called momentum trades perform poorly when markets reverse.
Some watchdogs are getting anxious. South Korean regulators this week tightened rules on exchange-traded funds linked to single stocks like Samsung Electronics 005930.KS and SK Hynix 000660.KS. Indian authorities have cracked down on options trading. China is restricting flows of cross-border capital, some of which was heading into overseas stock markets.
The stakes are high. A reversal of the artificial intelligence boom would hurt equity and debt markets around the world. It would also dent American wealth: equities now account for 46% of household assets, according to the Federal Reserve. At the peak of the dotcom boom in 2000 the figure was 39%.
SpaceX buyers who this week watched their stock dip below the IPO price may feel some regret. A broader selloff could repeat the painful lessons from past stock market bubbles: small speculators tend to get sucked in during the boom, lose their shirts in the bust, and then retreat. The proportion of German households investing in stocks more than doubled to 20% of the population between 1997 and 2001 before falling back. That ratio is once again approaching its previous peak. Will retail investors fare better this time? Somehow, I doubt it.
Chart of the week and parting shot
The rise of Chinese electric vehicles is rapidly becoming a global issue. Car exports topped 1 million in June and show no signs of slowing down. That’s a problem for importers, but it’s also evidence of intense competition in the world’s second-largest economy. The average net margin for a basket of 12 automakers dropped to 1% last year, from around 6% five years earlier. Katrina Hamlin foresees a pile-up at home and overseas.
It used to be fashionable for economists and policymakers to bemoan the lack of groundbreaking new inventions. The breakneck development of artificial intelligence has quieted those voices. Yet the rise of AI also highlights another phenomenon: the return of companies funding basic scientific research. So-called corporate labs, like AT&T’s Bell Telephone Laboratories, used to rack up Nobel Prizes. Jon Sindreu welcomes their return – even if it’s at the expense of competition.
Five things I learned from Breakingviews this week
Transporting freight to China through the Strait of Hormuz costs $375,000 per day per ship, up from well below $100,000 before the war. (Tolls will be extra)
Venture capitalists invested just $20 billion in China in the first quarter, compared with $267 billion in the U.S. (Stock markets to the rescue)
The number of phishing sites jumped by 138% after ChatGPT was released. (Hackers use AI too)
Chinese local government revenue from land sales halved between 2021 and 2025. (New model is needed)
Departing Shein chairman Donald Tang once appeared on a giant poster alongside his dog Satchi. (His successor is more secretive)
SPY•
