ETFC - E*TRADE Financial Corporation

NasdaqGS - NasdaqGS Real Time Price. Currency in USD
+0.69 (+1.36%)
At close: 4:00PM EDT

51.44 -0.02 (-0.04%)
After hours: 4:30PM EDT

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Performance Outlook
  • Short Term
    2W - 6W
  • Mid Term
    6W - 9M
  • Long Term
Previous Close50.77
Bid51.15 x 2200
Ask51.84 x 900
Day's Range50.67 - 51.91
52 Week Range25.76 - 57.30
Avg. Volume2,560,301
Market Cap11.377B
Beta (5Y Monthly)1.26
PE Ratio (TTM)14.87
EPS (TTM)3.46
Earnings DateOct 15, 2020 - Oct 19, 2020
Forward Dividend & Yield0.56 (1.10%)
Ex-Dividend DateAug 18, 2020
1y Target Est52.46
  • E*TRADE Releases Monthly Sector Rotation Study
    Business Wire

    E*TRADE Releases Monthly Sector Rotation Study

    E*TRADE Financial Corporation (NASDAQ:ETFC) today released the data from its monthly sector rotation study, based on the E*TRADE customer net percentage buy/sell behavior for stocks that comprise the S&P 500 sectors.

  • E*TRADE vs. TD Ameritrade

    E*TRADE vs. TD Ameritrade

    E*TRADE and TD Ameritrade offer comprehensive suites of investment and trading products as well as intuitive platforms with lightning-fast order execution and in-depth research.

  • Dow slips Friday, Nasdaq logs back-to-back declines amid rising China-U.S. tensions and languishing fiscal stimulus

    Dow slips Friday, Nasdaq logs back-to-back declines amid rising China-U.S. tensions and languishing fiscal stimulus

    U.S. stocks closed lower Friday with the technology-laden Nasdaq Composite notching its first back-to-back decline since mid-May as investors turn their attention to a flare-up in Sino-American animosities while Republican senators leave Washington for the weekend without obvious progress on another fiscal stimulus bill.

  • 10 Hot Stocks to Buy as the Coronavirus Gets Ugly Again

    10 Hot Stocks to Buy as the Coronavirus Gets Ugly Again

    In the immediate aftermath of the novel coronavirus' first assault, most investors scrambled for cover, resulting in sharp, extreme volatility. Sentiment bounced back quickly, though, in part due to strong government leadership. But with political divisiveness now the order of the day along with a rise in coronavirus cases, the case for hot stocks to buy appears in danger.While I'm not going to dismiss the risks associated with investing at this juncture, many publicly traded companies fundamentally offer compelling exposure. Yes, it's true that the pandemic has busted many business models, such as buffet-style restaurants. At the same time, it has also opened opportunities for suddenly relevant entities, attracting attention as potential hot stocks to buy.Beyond the obvious health concern, arguably the biggest source of anxiety for most Americans is the workplace. Particularly, what will it look like in the new normal and more elementally, will it even exist? For now, many white-collar workers are fortunate enough to operate remotely. But I've become cynical in that companies may use the pandemic as cover to outsource these jobs.InvestorPlace - Stock Market News, Stock Advice & Trading TipsHowever, Paul H. Pincus, partner at Ortoli Rosenstadt LLP and head of the firm's employment law practice, wrote to me in an email:"Federal and state laws generally do not prevent private employers from outsourcing U.S.-based jobs to other countries, although doing so may raise legal issues regarding data protection and privacy, export controls, and intellectual property rights. Also, outsourcing of specific jobs may be impacted by state or federal regulation of certain industries such as healthcare, finance, and insurance." * 10 Cybersecurity Stocks We Need Now More Than Ever Additionally, Pincus noted that it was "too early" to know if the present remote work phenomenon will lead to outsourcing. Given the complexities of this issue, hot stocks to buy related to the work-from-home sector may enjoy continued relevance. As well, these other companies may prosper in our new normal. * E*Trade Financial (NASDAQ:ETFC) * Upwork (NASDAQ:UPWK) * Intuit (NASDAQ:INTU) * Clorox (NYSE:CLX) * Tesla (NASDAQ:TSLA) * K12 Inc. (NYSE:LRN) * Universal Technical Institute (NYSE:UTI) * Chegg (NYSE:CHGG) * Sturm Ruger (NYSE:RGR) * Arlo Technologies (NYSE:ARLO)For this gallery, I'm going to mix in some "classics" as well as other names that I haven't much covered. This way, you'll have several choices for possible hot stocks to buy for our new normal and whatever lies beyond. E*Trade Financial (ETFC)Source: Alexander Oganezov / Starting my list with E*Trade may seem like an out-of-left-field idea. After all, we're talking about hot stocks to buy -- where you buy them doesn't really matter. In addition, we've been hearing talk for years about how millennials don't invest in the markets. Straight off the bat, this dynamic doesn't seem helpful to ETFC stock.Frankly, that's a valid point. However, that was an argument in the old normal. We're in the new normal now and the rules have changed. Thanks to the development of numerous online educational resources, I will argue that in some respects, the modern young investor is much more sophisticated than they were even 10 years prior.I believe this will benefit ETFC stock in that such investors don't want to miss out on a grand opportunity. They watched firsthand how the devastating Great Recession turned out to be a once-in-a-blue-moon moment to capitalize on great companies offered at a discount.That's why I believe E*Trade has recovered well from its March doldrums and why it belongs on your list of hot stocks to buy. Upwork (UPWK)Source: Sundry Photography / When it comes to pursuing a career in the new normal, the obvious name among hot stocks to buy invariably comes up: Zoom Video Communications (NASDAQ:ZM). While Zoom and the teleconferencing industry is no doubt benefiting from this crisis, I believe the nature of corporate America will shift. If so, you'll want to take a long look at Upwork.Considered a social media network for freelancers, Upwork connects businesses seeking assistance with specific projects with specialized independent contractors. Client companies receive bids from prospective freelancers (or "gig" workers) and they can make choices based on several criteria, including hourly rate, experience and certifications. It's the new way to job hunt, which makes UPWK stock especially intriguing.Also, I expect a sizable exodus from traditional employment structures to the gig economy. For one thing, many of those who are now working remotely are getting a taste of the gig life. According to the New York Times, many don't want to go back to the office. * Top 10 Sector ETFs on the Market Today Further, you must expect that hard-hit companies will collectively lay off millions. In that case, Upwork can help turn those frowns upside down. And that's a win-win for UPWK stock. Intuit (INTU)Source: dennizn / It's confession time: tax software specialist Intuit is undeniably boring. So why am I mentioning it on this list of hot stocks to buy? Well, if you follow the logic behind the case for Upwork above -- and more importantly, if you believe in it -- then INTU stock is a no-brainer.Like millions of you, I find tax season to be an arduous process. Just the thought of taxes makes me break out in a cold sweat. It's not the paying money to Uncle Sam that's the difficult part. Rather, the paperwork is just mountainous. And the more complex your tax situation, the more awful every April 15 becomes.As a run of the mill W2 employee and assuming you take the standard deduction, President Trump's tax law changes have been good for you, at least from an administrative perspective. But for freelancers who must deduct expenses from profits, it's another ballgame entirely.Potentially millions of people will find this out the hard way over the next few years. While a difficulty for those suffering from the transition, it's a net positive for INTU stock. Clorox (CLX)Source: TY Lim / Over the past few weeks, the Trump administration has gone full blast on promoting the necessity of reopening the economy. Undoubtedly, this is a crucial matter. However, more Americans are worried about the Covid-19 pandemic than they are about the economy. It's hard to argue with the logic -- nobody cares about money when they're sick and dying.This is a great time to bring up Clorox. As you know (probably from firsthand experience), the company's disinfectant products helped make CLX one of the hot stocks to buy during this crisis. However, shares got a little bit flat between the second half of May to early June. At the time, it seemed we got a handle on the coronavirus.Of course, we all know that this was a case of declaring "mission accomplished" before the job was truly done. Hmm … where have I heard that one before? But with Covid-19 cases spiking to record levels in several states, the bullishness for CLX stock has returned. * 7 Earnings Reports to Watch Next Week And I believe that the memory of this pandemic will stick with us for a long time. Therefore, don't be surprised if CLX stock has a longer upside pathway than you initially anticipated. Tesla (TSLA)Source: Pe3k / As a play on pure hot stocks to buy, Tesla is an obvious, perhaps tired idea. As the dominant force behind electric vehicles -- and all other car manufacturers, depending on Wall Street's mood -- TSLA stock has been a phenomenon. Yes, this is an overused word, but it applies perfectly for Tesla.However, prospective investors may not appreciate that TSLA stock is also a direct play on our new normal. On an individual basis, electric vehicles (all other things being equal) are easier to maintain. Operating purely on an electric battery, it conspicuously doesn't need an oil change -- the maintenance bane for many "traditional" drivers.Back in our old normal, I didn't think too much about this maintenance advantage. However, when the pandemic struck and I found myself simultaneously needing an oil change, yeah … you bet I got a rude awakening in favor of EVs. Presumably, others got "woke" to that reality, which may continue to drive TSLA stock on a longer-term basis.Another point is the oil price war. While cheap gasoline prices theoretically hurt EVs, it also demonstrates that our national fossil-fuel-based energy independence is actually still dependent on geopolitical factors. Moving to electric may help mitigate this vulnerability. K12 Inc. (LRN)Source: Shutterstock As a 2018 USA Today report demonstrated, school violence has been on the rise. But it's not just high-profile incidents that worry parents. Though controversial (for reasons I don't understand), I believe that schools removing faith-based principles and practices have contributed to moral decay and apathy in our young.It's enough to make you as a parent want to homeschool your children. Of course, that's a tricky process. Fortunately, K12 Inc. has an entire online infrastructure geared toward comprehensive home learning.I mention this because LRN stock was relevant before the pandemic. But in our new normal, contactless services come at a premium. You already see how companies like Amazon (NASDAQ:AMZN) and Domino's Pizza (NYSE:DPZ) have skyrocketed this year. I would hope that your children are more important than trinkets and pizza.Sure enough, LRN stock has launched into low-earth orbit since late June. Thus, I don't recommend buying shares right now. Like anything, I expect gravity to take over. * 7 Semiconductor Stocks Ready for Big Growth However, a possibly imminent correction could be a temporary one. With a viable vaccine still likely a year away at the earliest, K12 still has time as one of the hot stocks to buy. Universal Technical Institute (UTI)Source: Shutterstock When Ivanka Trump helped launch the "Find Something New" jobs initiative, both the mainstream media and political commentators panned it as being completely tone deaf. I can understand as I'm playing a small violin for the incredible privileged daughter of the President. But look beyond the criticism and you'll find some nuggets of wisdom.Now, the specific nugget I'm thinking about is Universal Technical Institute and UTI stock. If you look at the initiative's website, you'll note that some of the most in-demand jobs are hands on, such as electricians, elevator installers/repairers and wind turbine technicians. By no means is this an exhaustive list. But the theme here is that blue collar jobs matter.In fact, blue collar workers have never mattered more. According to the U.K.-based Independent, almost three-quarters of millennials admit they don't know how to change a flat tire. I'm pretty sure this is the same for the U.S. I have a hard time believing that the British - or most countries' citizens - are smarter or more useful than us.Post-pandemic, you'll likely see high demand from millennials who don't know how to do anything. That should be a big incentive for UTI stock. Chegg (CHGG)Source: Casimiro PT / If I may be painfully honest, our universities are oversaturated with students that don't belong there. The academic industrial complex has turned into a racket that neither serves the long-term interests of students nor the universities. Hence, I believe that the technical trade could experience a blue-collar renaissance, making publicly traded companies in that space hot stocks to buy.Nevertheless, this transition won't happen overnight. And that leaves Chegg in a viable position to enjoy significant upside. True, CHGG stock has already become one of the hottest commodities in the markets. Yet the startling number of coronavirus cases suggests that several academic institutions will conduct lectures exclusively online. If so, Chegg will become an even more valuable tool for students than it already is.Primarily, Chegg provides lower-cost access for textbooks, which are always student budget killers. If you look at the racket that the academic industry is pulling on our young -- nearly $200,000 average total cost for a private nonprofit four-year institution, as an example -- every dollar saved counts. * 10 Cybersecurity Stocks We Need Now More Than Ever Also, CHGG stock benefits from the underlying company's wealth of online tutoring services. If the coronavirus stays with us longer than expected, this will easily count as one of the hot stocks to buy. Sturm Ruger (RGR)Source: Susan Law Cain / If you look at the latest polls, the chances for Donald Trump winning a second term are about as good as me winning a first term. However, if he were to win, I believe his best chance is to play up fears of the majority white electorate.As you know, protesters have taken to the streets to call for social justice and equity. While noble, some folks in that camp have called for defunding the police or diverting police resources to other social programs. I'm almost 100% sure that this concept scares the majority population of this country.Thus, it's no surprise that Sturm Ruger has turned into one of the most popular hot stocks to buy. Prior to the pandemic, RGR stock had to contend with the firearms industry's ever-present controversy. But now, that controversy has faded, as evidenced by the record-breaking surge in gun sales.Initially, Asian Americans feared a racist backlash because of the coronavirus -- a situation that President Trump has only exacerbated with his deflection onto the Chinese culprit at every turn. Currently, I believe white buyers are hoarding guns and ammo in anticipation of a radical social change.This may be the nastiest and most cynical of hot stocks to buy. But as long as society is fractured like this, RGR stock will enjoy substantial upside. Arlo Technologies (ARLO)Source: Sharaf Maksumov / It's safe to say that wireless security camera specialist Arlo Technologies has been a disappointment. Starting life as a publicly traded entity in late summer of 2018, at its peak, ARLO stock was trading hands at over $20. But since September 2018, shares have been on a merciless decline.At the time of writing, ARLO stock is down 26% year-to-date. So, if you're thinking about buying shares, think very carefully.For the risk-tolerant speculator, Arlo has an outside shot of being considered one of the hot stocks to buy in the second half of this year. As I mentioned with Ruger above, regular people are scared about their safety. However, I think it's a stretch to assume that most Americans will become gun owners. According to the Washington Post, there are more guns than people in the U.S., indicating firearms enthusiasts have well more than one gun. * Top 10 Sector ETFs on the Market Today Rather than go through that hassle and all the potential headaches that come with gun ownership, most people will elect security cameras. They're convenient, non-offensive and act as a deterrent. In other words, they're perfect for the new normal.A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * Why Everyone Is Investing in 5G All WRONG * America's 1 Stock Picker Reveals His Next 1,000% Winner * Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company * Radical New Battery Could Dismantle Oil Markets The post 10 Hot Stocks to Buy as the Coronavirus Gets Ugly Again appeared first on InvestorPlace.

  • E*TRADE (ETFC) Q2 Earnings Top Estimates on Record DARTs

    E*TRADE (ETFC) Q2 Earnings Top Estimates on Record DARTs

    E*TRADE (ETFC) Q2 results display a rise in non-interest income, benefit provision and improved DARTs, partly muted by a fall in net interest income and higher expenses.


    The Nasdaq Is Leading the Way as Stocks Head Lower

    U.S. stock futures fell in response to continuing tensions between Washington and Beijing, as well as increasing coronavirus cases in the U.S. Following the Trump administration’s order earlier this week that China to close its consulate in Houston, China retaliated Friday by ordering the closure of the U.S. consulate in Chengdu. On Thursday, President Donald Trump told reporters that the phase one trade deal with China “means less to me now than it did when I made it.”

  • Benzinga

    E*TRADE Financial: Q2 Earnings Insights

    Shares of E*TRADE Financial (NASDAQ:ETFC) fell 0.56% in after-market trading after the company reported Q2 results.Quarterly Results Earnings per share were down 21.43% year over year to $0.88, which beat the estimate of $0.76.Revenue of $716,000,000 rose by 4.53% year over year, which beat the estimate of $674,180,000.Looking Ahead Earnings guidance hasn't been issued by the company for now.View more earnings on ETFCE*TRADE Financial hasn't issued any revenue guidance for the time being.Price Action 52-week high: $57.30Company's 52-week low was at $25.76Price action over last quarter: Up 34.64%Company Overview E-Trade is one of the largest direct-to-investor platforms in the United States and housed over $500 billion of invested assets and client cash at the end of 2019. The company generates interest income on noninvested cash on its platform, trading commissions, service charges including payment for order flow, and fees from stock plan administration. Almost all the company's revenue is generated within the U.S.See more from Benzinga * Earnings Scheduled For July 23, 2020(C) 2020 Benzinga does not provide investment advice. All rights reserved.

  • MarketWatch

    ETrade shares flat after company reports 5% increase in revenue

    ETrade Financial Corp. shares were flat in after-hours trading Thursday after the online brokerage service reported fiscal second-quarter results that slightly exceeded Wall Street estimates. ETrade reported net income of $196 million, or 88 cents a share, compared with net income of $219 million, or 90 cents a share, in the year-ago quarter. Revenue improved 5% to $716 million from $685 million a year ago. The company also declared a quarterly cash dividend of 14 cents a share. Analysts surveyed by FactSet had expected adjusted net income of 76 cents a share on sales of $677 million. ETrade's shares have improved 15% this year. The broader S&P 500 index is up 0.2% in 2020.

  • E*TRADE Financial Corporation Announces Second Quarter 2020 Results
    Business Wire

    E*TRADE Financial Corporation Announces Second Quarter 2020 Results

    E*TRADE Financial Corporation (NASDAQ:ETFC):

  • United reports $1.6B loss in in Q2, Snap sinks on growing net loss
    Yahoo Finance Video

    United reports $1.6B loss in in Q2, Snap sinks on growing net loss

    Yahoo Finance's Adam Shapiro and Julie Hyman break down the latest earnings reports from United Airlines, Snap, TD Ameritrade, and E*TRADE.

  • Will Trading Revenues Support E*TRADE's (ETFC) Q2 Earnings?

    Will Trading Revenues Support E*TRADE's (ETFC) Q2 Earnings?

    E*TRADE's (ETFC) Q2 earnings likely to reflect an improved trading performance, partly negated by the depressing impact of a lower net interest income.


    E*Trade Shareholders Approve Morgan Stanley Takeover

    More than 99% of shareholder votes cast were in favor of the deal, which is on track to close in the fourth quarter of this year.

  • E*TRADE Financial Shareholders Approve Morgan Stanley Deal
    Motley Fool

    E*TRADE Financial Shareholders Approve Morgan Stanley Deal

    The consolidation of the online brokerage segment has taken another big step forward. On Friday, E*TRADE Financial (NASDAQ: ETFC) announced that its shareholders voted overwhelmingly to approve their company's merger with white-shoe financial services mainstay Morgan Stanley (NYSE: MS). The merger, which in effect is an acquisition by Morgan Stanley of its peer, was agreed to by both companies in February.

  • E*TRADE Financial Corporation Announces Stockholder Approval of Merger With Morgan Stanley
    Business Wire

    E*TRADE Financial Corporation Announces Stockholder Approval of Merger With Morgan Stanley

    E*TRADE Financial Corporation (NASDAQ: ETFC) announced that its stockholders have voted to adopt the merger agreement with Morgan Stanley, a leading global financial services firm. In its special meeting of stockholders, which was held earlier today, more than 99% of votes were cast in favor of the proposal, based on the preliminary count of proxies returned prior to its special meeting of stockholders. The final voting results will be publicly filed with the Securities and Exchange Commission on a Form 8-K within four business days.

  • Reuters

    Bored bank customers flock to day-trading platforms during pandemic

    Major U.S. brokerages that reported quarterly results this week cheered the self-directed day trading happening on their platforms as individuals with a bit of extra money and time on their hands during the coronavirus pandemic have been engaging more in markets. Bank of America Corp’s self-directed investment platform Merrill Edge saw trading volume rise 184% and new accounts up 13% during the second quarter. It now has nearly 3 million users with a record $246 billion in assets, a spokesperson said.

  • TradeZero Onboards Dave Portnoy, Sponsors Davey Day Trader Global Show #DDTG

    TradeZero Onboards Dave Portnoy, Sponsors Davey Day Trader Global Show #DDTG

    TradeZero America, a commission-free trading platform, formally announced a sponsorship deal with Barstool Sports founder Dave Portnoy.What Happened? On June 25, Portnoy without much explanation, was booted off of E*Trade Financial Corporation's (NASDAQ: ETFC) electronic trading platform.Alongside the development, TradeZero, a holistic trading technology and brokerage provider whose commission-free, direct-access routing web and desktop platforms allow market participants best-access to consistent execution and trading insights, onboarded Portnoy and announced it would sponsor the Davey Day Trader Global DDTG show, allowing new users free TradeZero Pro access."We were looking at promoting, sponsoring the show for quite some time," said TradeZero co-founder Dan Pipitone. "We signed a sponsorship deal and that day he got thrown off E*Trade. It kind of happened and he brought the account to us."According to Pipitone, the sponsorship speaks to what TradeZero is as a company: "We're really geared to when those brand new players want more and it is apparent that they're limited."Why It Matters? As part of a vision to be the leading destination for connecting people to the largest markets, TradeZero is honing in on improved streaming and consistency in execution."We're looking to create a velvet rope experience," Pipitone noted in an interview earlier this year regarding the firm's improved charting and options offering. "People can come and fund their accounts for free. They can run with our dynamically updating level one platform."To learn more about TradeZero's diverse portfolio of trading solutions, click here.See more from Benzinga * Beaxy Democratizes Access To Digital Assets With Prime Trust Partnership * MoneyLion Introduces RoarMoney, A New Take On Mobile Banking * QuantConnect Democratizes Marketplace For Trading Algorithms Via New Subscription Model(C) 2020 Benzinga does not provide investment advice. All rights reserved.

  • Robinhood Raises an Extra $320 Million in Capital, Bringing Valuation to $8.6 Billion
    Motley Fool

    Robinhood Raises an Extra $320 Million in Capital, Bringing Valuation to $8.6 Billion

    Arguably the highest-profile securities broker at the moment, Robinhood is set to become larger following a major infusion of capital. The company, which aims to disrupt the traditional brokerage segment of the finance industry by targeting younger traders, has raised an additional $320 million in its latest funding round, the company announced as an update to a May blog post. Robinhood said in the blog post that it will use the funds from this financing round to scale its platform, further build out its operations, and develop new products.

  • Were Hedge Funds Right About E*TRADE Financial Corporation (ETFC)?
    Insider Monkey

    Were Hedge Funds Right About E*TRADE Financial Corporation (ETFC)?

    The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are […]

  • E*TRADE Corporate Services Launches Industry-First API Developer Platform
    Business Wire

    E*TRADE Corporate Services Launches Industry-First API Developer Platform

    E*TRADE Financial Corporate Services, Inc. today announced the E*TRADE Equity Edge Online (EEO) Developer Platform.

  • E*TRADE Study Reveals Significant Rebound in Bullish Sentiment
    Business Wire

    E*TRADE Study Reveals Significant Rebound in Bullish Sentiment

    E*TRADE Financial Corporation (NASDAQ: ETFC) today announced results from the most recent wave of StreetWise, the E*TRADE quarterly tracking study of experienced investors. Results indicate investors are bullish on the market but have a wary economic outlook:

  • E*TRADE Financial Corporation Announces Second Quarter 2020 Earnings Release Date
    Business Wire

    E*TRADE Financial Corporation Announces Second Quarter 2020 Earnings Release Date

    E*TRADE Financial Corporation (NASDAQ: ETFC) today announced that it will report its second quarter 2020 financial results after the close of the US financial markets on Thursday, July 23. The Company will file its standard earnings press release and, in lieu of a conference call, will post supplementary materials on

  • Palihapitiya: Skip government bailouts, put more money 'into the hands of consumers'
    Yahoo Finance

    Palihapitiya: Skip government bailouts, put more money 'into the hands of consumers'

    'What you would have is a slow rebuilding of the economic vitality in America,' Palihapitiya says.

  • Why E*TRADE (ETFC) Stock Might be a Great Pick

    Why E*TRADE (ETFC) Stock Might be a Great Pick

    E*TRADE (ETFC) has seen solid earnings estimate revision activity over the past two months, and belongs to a strong industry as well.

  • Bloomberg

    Don't Blame the Fed for the Robinhood Trading Blitz

    (Bloomberg Opinion) -- Optimism is plentiful in the various online forums such as Reddit’s r/wallstreetbets where the fast-growing number of small investors discuss stocks. There you’ll find little to no discussion of betting against equities —  even those of bankrupt companies — following the S&P 500 Index’s remarkable 39% gain from its low this year in late March. The head cheerleader for these legions of day traders is Dave Portnoy, the founder of the website Barstool Sports, who has attracted a wide following by live-streaming his trading exploits.Why should anyone care about a bunch of market neophytes opening up accounts with the Robinhood investing app to trade stocks? Because the last time we saw such a frenzy of retail participation was during the dot-com mania 20 years ago, which ended in a spectacular bust. I’m happy that people have taken an interest in financial markets, just not to the degree that we have seen lately.Among professional investors, the proximate cause of this speculation is the Federal Reserve, which has provided an astounding amount of liquidity to support the economy and the functioning of financial markets, slashed its benchmark interest rate to zero, pledged unlimited quantitative easing and to buy a range of risky assets. Its balance sheet assets have soared from $4.16 trillion in late February to $7.17 trillion as of last week.The Fed may be a convenient scapegoat, but the real villains are the discount brokers, which cut their trading commissions to zero last year. Millennial-focused Robinhood saw 3 million new accounts opened in the first quarter alone. Average trading volume at E-Trade and TD Ameritrade combined has gone from about 1 million trades per day in 2018 to 4 million today, according to Jason Goepfert, the president and chief executive officer at SentimenTrader, an independent investment research firm dedicated to the application of mass psychology to the financial markets.Basic economics teaches that the demand curve slopes downward. If something is cheap or free, people will demand more of it. To be sure, eliminating commissions wasn’t part of a larger strategy to get people to trade more; it was simply a matter of market forces and capitalism driving prices lower. But it has had catastrophic effects, luring millions of unsophisticated people into the stock market, where they will most likely lose money that they can’t afford to lose.Commissions actually only ever represented a small part of a discount brokerage’s revenue, something less than 20%, according to various studies. The bulk of their revenue, or about 60%, comes from net interest income, which is when they take their cash balances and reinvest them in low-risk securities that yield a bit more. The rest comes from securities lending and payment for order flow, which his how trades are routed to electronic market-makers. We have learned over the years that it can be very profitable to bet against retail trades, and firms that specialize in making markets have been willing to pay handsomely for access to those trades. Out of all the discount brokers, Robinhood receives the largest portion of its revenue from payment from order flow, or almost 10%.A lot of people like to trot out the tired argument that reduced fees are good for investors. But what the recent episode shows is that higher commissions are actually better in that they reduce trading activity and promote buy-and-hold strategies that tend to outperform in the long term. High transactions costs are not the enemy, because they nudge investors towards optimal behavior.Unfortunately, there is no easy remedy. It would be lunacy to pass legislation that would force brokerages to increase commissions or enforce any other top-down solution that would bar millions of unsophisticated investors from being sucked into the stock market. But if this ends badly for the newcomers -- and it almost certainly will -- it will result in even more millions of people becoming disenchanted with not only the stock market, but possibly even capitalism.To be clear, it’s not bad that the stock market has once again captured the imagination of the broader investing public. What is so disconcerting is that people are trying to get rich fast, rather than through a methodical strategy. The financial Darwinism of the market eventually sorts this out, but the consequences—especially in this political environment, where capitalism is already on shaky ground—could be catastrophic.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Jared Dillian is the editor and publisher of The Daily Dirtnap, investment strategist at Mauldin Economics, and the author of "Street Freak" and "All the Evil of This World." He may have a stake in the areas he writes about.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Top Stock Reports for Merck, CVS & Morgan Stanley

    Top Stock Reports for Merck, CVS & Morgan Stanley

    Top Stock Reports for Merck, CVS & Morgan Stanley