Amateurs came to the American stock exchanges. Now the future of the world economy depends on them

In an era of low rates and limited profitability on bank deposits, people begin to look for alternative ways to preserve their savings, many enter the stock market. Unlike Russia, where only 6.3 million people are listed on the two main exchanges, about half of the population in the United States has personal brokerage accounts.

Such activity has a positive effect on the country`s economy, heals it, and makes the shares of traded companies more attractive. But at the same time inept and adventurous actions of the players can lead to problems for the entire financial system. 20 years ago, it was because of them that the famous dot-com bubble happened, now with the help of popular social networks and forums, profit-hungry traders rocked the stock market, ready to follow any price change. Details in the material "Lenta.ru".

Miracles are near

Economists and journalists started talking about unusual phenomena in the American stock market relatively recently. The confident growth of quotations did not arouse suspicion for a long time: it was attributed to the traditional New Year rally (a sharp rise in the price of securities) and the optimism of players due to the improving relations between the United States and China. Even the unprecedented rise in shares of the electric car manufacturer Tesla, which rose in price two and a half times in December-January, was attributed to good financial statements and the opening of a new plant in Shanghai.

Find an explanation for the Virgin Galactic dash transport and space company of British billionaire Richard Branson turned out to be more difficult. Its market capitalization has grown nearly 200 percent since the end of last year to $ 6.7 billion, peaking at $ 37.2 per share, down from just over $ seven in December.

The strangeness becomes even more apparent when you consider that Virgin Galactic does not have any operational activities, but only sells tickets for the first test flights into orbit, scheduled for the end of the year. In the third quarter (from April to June) of 2019, they managed to bail out $ 832 thousand, but even a net loss of $ 51.5 million did not embarrass investors who rushed to buy shares.

Some financiers still tried to reason rationally, for example, they recalled the imminent end of the economic cycle, which usually lasts 10-12 years. The last major crisis happened in 2008, which means that we should expect a recession soon, but for now everyone is trying to capitalize on the last months of growth. Peter Prikvar, an analyst at the investment company Bleakley Advisory Group, made a different argument: “It’s not the first time in the history of the stock market that someone has appeared who promises to cure humanity of cancer or deliver it to other planets. These projects resonate with people who are risk averse and are waiting for the moment to toss the dice.

Everything is optional

Others drew attention to an initially invisible feature: the growth of stock quotes coincided with the rise in popularity of options on them. These derivatives give the holder the right to buy (call option) or sell (put option) an asset in the future at a predetermined price. Once they were invented by industrialists in order to be able to hedge against unfavorable market conditions. Farmers didn’t have to worry that because of a too good harvest and an oversupply, grain sales would be cheaper than the cost price, and the carriers fixed gasoline costs in advance. The payment for the peace of mind was the premium received by the option sellers, it was equal to a few percent of the total transaction amount.

Subsequently, speculators began to actively use options, seeking to make money on any market movements, due to which settlement contracts appeared. They do not provide for the delivery of the underlying asset: if the price for it rises, the owner of the call option can demand the difference between the value specified in it and the current value it will be debited from the original seller`s account. Under such conditions, options have gained additional value now you can not only use them, but also resell them. At the same time, the original issuer will still pay the end customer usually they are banks and investment companies. In a normal situation, they can only count on a premium, the amount of possible loss, on the contrary, is not limited.