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The far-reaching implications of the amateur trading wave

Part II of II by Claudio Grass, Hünenberg See, Switzerland

Case in point: Silver apes” 

One of the most astounding elements of this shift in retail investing is the proof it offers for what many of us knew along: When people can freely and directly vote with their wallets and put their money where their mouth is, one gets a much clearer picture of what the public, the market or any other large group really thinks and really wants. In this case, we first saw the wrath against hedge funds, banks and institutional investors manifest itself through the so-called “meme stocks” and short squeezes. 

Countless small amateur investors came together online and coordinated voluntarily, without any force and with their own money at stake. They targeted specific stocks that had formidable short positions against them and pushed the price higher and higher, causing a serious and very expensive problem for firms and banks they perceived as part of the “establishment”. Companies like GameStop and AMC made mainstream headlines, as did the record amounts in losses suffered by the investors who had to acknowledge defeat and rush to cover their shorts. These “David and Goliath” scenarios, as well as the impressive returns that many first-time traders enjoyed, provided clear evidence of the kind of power ordinary people can wield, and it certainly emboldened more of them to enter the markets. 

As the amateur trading trend grew stronger and spread wider, we began to witness some other interesting developments too. While meme stocks and cryptos are still very much popular, especially with younger traders, the focus slowly but surely started to get shifted towards other asset classes too, implying that there’s a significant part of this new wave of investors that actually understand a lot more about the markets, the economy and the banking system that the media gives them credit for. 

A growing social media and online trading movement, inspired by the WallStreetBets forum, has turned to buying up physical silver as a way to bring down what they rightly see as a corrupt banking system, but also to protect their savings from this new era of inflation that we are just entering. Close to 130,000 everyday citizens, of all ages and backgrounds, and without any specific economics or finance education, have come together online and embarked on a concerted campaign against banks and financial elites. Often calling themselves “silverbacks” or “apes,” an homage to the “Planet of the Apes” film, this new class of investors, mostly trading with small accounts, have identified and fully understood a lot of the problems, the vulnerabilities and the obvious unsustainability of the current financial system and of fiat money itself. 

They also clearly recognize everything that is wrong with big banks trading huge quantities of paper contracts for silver that they don’t have in their vaults, and that doesn’t actually even exist. They saw this as a massive weak point of the present system and all the establishment players: If they could keep growing their movement, keep working together and keep buying up and holding the physical metal, they could cause severe disruptions to the paper trading system. There’s already nowhere near enough silver if every contact holder decided to take delivery, so “cornering the market” and squeezing the institutional players could put immense pressure on the market and send the price to unprecedented highs. 

Of course, the idea of cornering the silver market is a tall order. Only about 25% of the 1 billion ounces of silver that are produced each year is used to manufacture bars and coins, as silver, unlike gold, also has extensive industrial applications and demand. However, that doesn’t mean that this army of small retail investors has no hope of having an impact. As Reuters reported earlier this month, “after the posts on WallStreetBets, around $3 billion rushed into a fund run by asset managers Blackrock that stores silver for investors. Blackrock said it added more than 100 million (adds dropped word) ounces of silver to its stockpile in three days. Silver’s wholesale price jumped nearly 20%.” The news outlet further highlighted that the LBMA also acknowledged there had been “concerns that London would run out of silver.”

The bigger picture 

If we put aside speculation over short term price moves and we focus on the most important elements of this retail investing wave, it is clear that it has motivated a lot of ordinary people to read, do their own research, learn from each other and go hunting for the answers they would never get through mainstream media reports, political speeches or public education. This mass shift towards doubting the “consensus narrative” and making up one’s own mind based on evidence, common sense and independent thinking, is arguably the single most significant and consequential development of this whole trend. 

What is also very encouraging is that the kind of answers that most people arrive at at the end of their search for the truth and for a clearer understanding of how the current system really works are all based on sound ideas. They see the need for real money, the unjust structures and rules that keep the market from being truly free and the unfair advantages that financial and political elites enjoy over the average voter, worker and saver. Unlike the “solutions” that they would dogmatically receive in academic circles, the ones they discover themselves are much more realistic, viable and actually helpful, not just to them directly, but to society at large. Notions like individual and financial freedom, personal responsibility and voluntary cooperation are the cornerstones of any healthy social and economic system and the fact that each participant reaches this conclusion freely makes an invaluable contribution to the longevity, stability and functionality of said system. 

Overall, it might be still be too early to estimate the precise impact of this phenomenon. We already know it can move stock prices or push silver to multi-year highs, and that kind of effect is likely to persist or even get amplified as more and more new traders join the race. However, what is infinitely more interesting is its potential to bring about much wider and significant changes, not merely confined in the markets, but also on a social and political level. If movements like these reach a critical mass, the right ideas can begin to spread and start being discussed and debated in the public square. This kind of dialogue, this free competition of ideas is the first step towards a sound society.

This article has been published in the Newsroom of pro aurum, the leading precious metals company in Europe with an independent subsidiary in Switzerland. 

This work is licensed under a Creative Commons Attribution 4.0 International License. Therefore please feel free to share!

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Claudio Grass
Claudio Grass is a passionate advocate of free-market thinking and libertarian philosophy. Following the teachings of the Austrian School of Economics he is convinced that sound money and human freedom are inextricably linked to each other. He is one of the founders of GoldAndLiberty.com. He is also founder of GlobalGold Switzerland ................. Keeping assets outside of the country you live is key. Switzerland remains the best jurisdiction for private property rights. Why? Because of its federalist structure in combination with direct democracy. It assures that the power of politicians is limited and that the people and not the politicians are the sovereign.
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