Scores of people who thought they would take advantage of a volatile stock market as the COVID-19 pandemic began in earnest have learned a hard lesson after losing most or all of their fortunes thanks to bad luck, bad habits and/or over-leveraging their positions.
One of them is amateur trader Omar Ghias, who managed to amass a $1.5 million fortune, only to blow it all and wind up working for a few bucks an hour plus tips.
According to The Wall Street Journal, "stocks surged during the early part of the pandemic, gripped by a speculative fervor that cascaded across all markets. As his gains swelled, so did his spending on everything from sports betting and bars to luxury cars. He says he also borrowed heavily to amplify his positions."
The outlet noted further:
When the party ended, his fortune evaporated thanks to some wrong-way bets and his excessive spending. To support himself, he says he now works at a deli in Las Vegas that pays him roughly $14 an hour plus tips and sells area timeshares. He says he no longer has any money invested in the market.
“I’m starting from zero,” said the 25-year-old Ghias.
The outlet went on to note that during the COVID lockdowns that began in early 2020 and stretched into 2021, thousands of Americans became hooked on stock trading, stock options, and cryptocurrencies. The increased activity drove up the price of shares of many companies once thought to be on the verge of collapse. Now, some of the so-called "retail investors" are moving back out of the market after stocks suffered their worst year in Joe Biden's inflationary economy since 2009. Others are cutting their positions or moving funds to more conservative holdings like cash or bonds or silver/precious metals.
In fact, the pullout of amateur traders from the market is itself having a negative impact, the WSJ reported. In January, for instance, trading activity among that group of traders, in terms of dollar volumes, were at the lowest level since January 2020, an analysis of some trading platforms by Vanda Research found.
"These investors are also trading less with brokerages that stoked their enthusiasm earlier in the pandemic, according to earnings reports. Households are expected to yank roughly $100 billion from the market in 2023, according to Goldman Sachs Group Inc., which would be the first net outflows since 2018," the WSJ noted.
What the amateur investors do next will likely play a major role in how the stock market moves -- up or down. Still, that group is the largest holder of U.S. equities, Goldman Sachs says, and any pullback from traditional stocks will take away a steady support source at a volatile time. Inflation fears and a potential recession are still looming and several large companies are bracing for economic turmoil. Also, Federal Reserve officials say they are not done yet with rate hikes as they continue attempting to bring down inflation.
"A run-up last month in certain stocks such as online car seller Carvana Co. and retailer Bed Bath & Beyond Inc. led some professional investors to speculate that individual investors were behind the moves," the outlet continued. "The overall market pushed higher this past week after the Federal Reserve raised interest rates by a widely expected quarter percentage point; the S&P 500 is up 7.7% thus far in 2023 and the Nasdaq 15%."
As for Ghias, he told the WSJ he doesn't have a dime in the stock market currently, sharing screenshots of his accounts that show he has about $15,000 in credit card debt, a $36,000 auto loan, and $6.99 in his checking account. He told the Journal he also has some cash.
“I felt like I was indestructible,” he said of his trading days. “It was irrational.”
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