I have a brief quote in the Weekend WSJ:

“Investment professionals are anticipating an influx of income- and growth-hungry mom-and-pop “retail” investors into the stock market this year—especially as the economy picks up and pressure grows for interest rates to start rising.

The key is that equities have been hated for so long and the negatives are largely well known,” says Barry Ritholtz director of research as New York-based financial-services firm Fusion IQ. “Positive data would be an upside surprise to the bulk of investors.

For years, individual investors have fled stocks in favor of bonds or money-market funds. And who can blame them after the financial crisis crushed share values in 2008 and early 2009?”

The full article is worth reading . . .


Are Mom and Pop Heading for Wall Street?
Simon Constable
WSJ, January 20, 2013

Category: Media, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

35 Responses to “Will Mom and Pop Return to Stocks?”

  1. ConscienceofaConservative says:

    “Mom & Pop” have been burned so many times in the past 1, 2 decades that I don’t see them coming back soon. It could easily take another generation along with an income group having a positive experience before they return. I can’t see an influx of retail investors until an existing demographic has a positive story to tell.

  2. tjandthebear says:

    This article was written before AAPL got cored.

  3. Angryman1 says:

    Nah, they will say in bonds……..to the bubble starts reaching the nadir as usual. Rinse, lather and repeat.

  4. pm2416 says:

    Hmmm, lessee: S&P at 666 in March, 09 to 1500 (briefly) today, not quite 35 months later. What’s that? About 30% annualized? If Mom & Pop were dumb enough to get out at the bottom, we can expect nothing less from them at the top. They have only done this every single other time before.

  5. stonedwino says:

    Mom and Pop are broke man….and so is Gen X and Gen Y. The 1% and HFT are the only game in town…Demographics spell doom for Wall Street and the GOP…

  6. danm says:

    Most investors don’t sell at the trough because they want to… they sell because they are in dire straits and need the cash to maintain their lifestyle or make ends meet.

    The only way consumer debt levels are ok in the US is if we get big inflation and if most everyone forgets about retirement.

  7. craig.r.jackson says:

    The question is predicated on whether the economy will enjoy some sort of sustained recovery that will give Mom & Pop the confidence to return. They will not return if there’s an economic slowdown in the middle of every year, as in 2010, 2011, 2012. I do not think there is a group of Mom & Pops sitting around waiting to invest. It’s a function of how much money is available. The slower the economy, the less available to go into the stock market. Remember that Mom & Pop are retiring in huge numbers here and in Europe and China and Japan. I think we need sustained growth of at least two percent for at least a few quarters to get them hooked. If they perceive inflation rising while banks continue to pay paltry interest, then they will move the money into stocks even faster. By the way, that could also raise bank earnings exponentially because higher long rates less paltry deposit rates equals higher net interest margin. Maturing CDs and increased economic activity make bank profits look even better. The icing on the cake is the new M&A activity due to the return of Mom & Pop. Banks make out like a bandit.

  8. mad97123 says:

    I understand the idea of an orderly rotation out of bonds into stocks, but as several of yesterday’s article links noted, it’s very unlikely to be orderly, and the bond wealth (unrealized gain) destruction will cause all kinds of problems in diverse markets, including the stock market.

    Hard to see those tramatized baby boomers running back for another helping of stock risk.

  9. as I mentioned, recently, “Wall St.” should be, more?, concerned about ‘Institutions’ ‘leaving “Wall St.”‘…


    “Mom & Pop” are heavy ‘Users’ of “Wall St.”, whether they own 68 shares of XYZ, or not..

  10. RW says:

    Hope springs eternal and the return on investment grade income assets sucks so, sure, why not. But as others have pointed out, they either don’t have much left to invest or they’re trying to monetize what they have or both.

    Not a lot of liquidity there but equities are a much smaller market than bonds so maybe a boost …for a little while.

    Not going to get if from the 0.1% or HFT: they’re parasitic; all effects including vol are secondary or tertiary.

  11. mad97123 says:

    Even Ma & Pa can see that the defict spending and money can’t be sustained unless “this time is diferrent” which it always seems to be until it isn’t.

    It doesn’t smell right, and people feel it at a gut level.

  12. bonzo says:

    The real question is whether Mom and Pop will return to running up debt. Or to be precise, is the savings rate more likely to rise or fall in the next few years. If it rises, corporate earnings will drop and that threatens the stock market big-time. If the savings rate falls, then there is the possibility of a bubble in stock prices, fueled more by performance chasers and hedge funds desperate not to be left behind again than by Mom and Pop. My bet is on the savings rate rising. Mom and Pop are either in debt and/or lack a retirement plan and hence they need to save, not run up more debt.

  13. DRR says:

    Ma and Pa Boomer are too old now to risk another stock crash. Instead, they are looking at paying down the mortgage, buying up some retirement property and using their cash to invest in ‘real stuff’.

  14. Petey Wheatstraw says:

    Buy now, or be priced out FOREVER!

    The entire economy reminds me of both the dotcom and RE bubbles. Something is fundamentally wrong with this picture, but it’s difficult to pin down exactly what it is (actually, I could point to several things that are bothersome, but those commenting before me have covered some of it).

    No doubt, the market trend is impressive, but I believe most of us know that this trend was not natural/organic. It’s kind of like watching Lance Armstrong winning all of those Tours de France, and knowing, in one’s heart of hearts, that he was juicing.

    There is also a nagging concern that the higher the markets climb, the worse the bust will be.

    Remember: Some of these things can only be seen after the fact (in the rearview mirror, so to speak), and it’s also difficult to forget how many people were saying that they should have known better after both of the aforementioned events.

    I believe a new ‘old chestnut’ is in order regarding mom and pop being sucked into the draft created by the APPARENT strength of the markets:

    Fool me once, shame on you.
    Fool me twice, shame on me.
    Fool me three times, and I am a certifiable fucking imbecile.

    There will be tears.

  15. MayorQuimby says:

    Why??? Even the best stocks (divvy-wise) only pay 2.5-3 pct! With massive downside risk, and everyone having lived through 2008 I just don’t see it. At all.

  16. Glen says:

    Mom and Pop are stuck paying the credit cards off, and paying their kids student loans. So sorry, Obama will have to privatize Social Security like he did heath care insurance to pump more money into the market (plus what the Fed is already pumping in.)

  17. TLH says:

    The government controls the bond market. The liquidity controls the stock market. The average person trusts government less. This is a recipe for stock market success? Where would we be if we took the government out of the bond market? The people are not buying what the elites are selling.

  18. constantnormal says:

    I doubt that “Mom and Pop’s” compensation has improved, so real wage levels remain at levels of more than a decade ago … so long as the casino is run by the mob, it seems doubtful that “Mom & Pop” will be eager to take their paltry few nickels to Atlantic City … they will be using every spare nickel to pay down debt …

  19. constantnormal says:

    How long did it take “Mom & Pop” to return to the stock markets following the Great Depression?

    While their stock portfolios (IRAs, 401Ks) may or may not have largely recovered, their home values have not, nor have their (entirely justified) fears about our “free markets” been reassured. And their incomes still lag far, far behind their rising expenses, and they see stories about the wealth of CEOs daily, as well as serve witness to the wealth of their doctors and other one-percenters who feed upon serve them, with medical expenses still being the number one cause of personal bankruptcy …

    If the Pecora Commission had not happened in the 1930s, and reforms instituted to protect the markets, what are the odds that Mom & Pop would have ever returned?

    Where are the reforms of today? The Dodd-Frank legislation? hahahahaha …

  20. BennyProfane says:

    As stonedwino said above, Mom and Pop have no money. Half of Boomers literally have no savings. Zero. On average, the other half have 50 grand. Only the top 10% have any significant amount to even consider. Maybe we can watch the managers of the pension funds that maybe 20-30% of Boomers will be collecting from for any kind of action, but, that’s about it. Most Moms and Pops are working to the last breath, or looking for cat food discounts.

  21. stonedwino says:

    BR: This is what I love about coming to this blog and actually enjoy reading not only what you write, but the rather intelligent conversation that goes on with rational people. This thread is universally in the camp of Mom & Pop are broke and the Casino is playing with its own money. Your readers are intelligent, smart, rational people and they are not drinking the kool-aid.

    Until taxation of the wealthy and corporations is addressed, along with the massive income inequality and disparity, Wall Street will have to keep eating it’s own. It amazes me how short term thinking still dominates…Not! It’s all about I got mine, fuck y’all – and that’s not a winning long term strategy for anyone, including those that happen to hold the cards at this point. Invest back into my business: I know what it’s about, what is at risk and what my potential returns are…

  22. papicek says:

    New investors are moving in to take their place. My observations indicate they are overwhelmingly the worst investor demographic out there: young men.

    Just saying.

  23. rd says:

    You need to have money to be a retail investor. Wall Street has systematically stripped money from the bottom 90% and redistributed it to the top 2%. If they want to offload their stocks at the bull peak onto “retail investors”, they need to sell to the millionaires and billionaires that have the money now.

    Much of the savings that the bottom 90% have will be in their 401ks and IRAs. These are not well suited to day trading – most will be in mutual funds and increasingly ETFs. Now that the fees and expenses for 401ks need a much higher level of reporting, they will liekly decrease so those profit margins will probably come under increasing pressure.

    At least they have a new generation of workers entering the work force who will be able to invest….oh wait, they can’t get jobs because the jobs were offshored. Oh well…..more stories about Wall Street employees having to go without 6 and 7 figure bonuses will be coming.

  24. Concerned Neighbour says:

    It’s becoming clear we live in a goldilocks era where individual investors are no longer needed to see perpetual stock market growth. The central banks and supporting institutions, with their handy loss-proof algorithms, are in full control.

    AAPL’s down 12%? Screw it, let’s pump NFLX up 45%! Laughable, but it’s the reality we live in. I honestly believe there is a distinct possibility the central banks will have all stocks trading with AMZN-like valuations by the time this “market” falls again, if it ever does.

  25. Moopheus says:

    Mom & Pop don’t hate equities. They hate the people who sell them. They perceive Wall Street to be a wretched hive of scum and villainy. The perceive the market to be a rigged game that works against their interests. They perceive that financial institutions can commit any kind of crime or fraud and go substantially unpunished. The sane response for Mom & Pop is to stay as far away as possible.

  26. Greg0658 says:

    I’m in agreement with stonedwino & danm at 9:09pm last nite.

    I logged in to remind – that owning a stock certifcate floats to the selling price – and in the end – those with the cash will own that paper certificate of a corporation that may or may not give you powers in the boardroom & top floor office.

    Generally we all helped feed the small fry into becomes whales – and I think the tables may turn on us. The power to starve is there. Very few of us can fend for ourselves – including our government.

    Do Not Allow chaos to ensue. You probably will be disappointed on which side of the castle wall you stand.

    before submit – remiss if – “corporations are people too” – or full of people who can be benefactors to the communities they live in and service – if the OpSys allows them.

  27. Greg0658 says:

    if pension systems fall apart – there will a great rebalance’g across the globe and put almost all G10+ nations on equal footing with the other new kids on the block .. but who will own the stuff here and live to play another century is up for grabs .. after a century “dazed & confused for so long its not true”
    is just “a new reality is real” and a story for the history books

  28. gordo365 says:

    Moopheus – strange choice of words “They perceive Wall Street to be a wretched hive of scum and villainy.” Like saying I perceive that it is cold outside. It IS cold outside.

    Wallstreet IS run by crooks with supercomputers. Word.

  29. Moopheus says:

    “Like saying I perceive that it is cold outside. It IS cold outside.”

    That is a projection of your perception to the external reality. We perceive it to be cold because our bodies require a consistent internal temperature. When our bodies’ core loses heat, they produce a physiological response that we experience as cold. What we perceive as hot and cold are merely an accident of the environment we live in and our evolutionary adaptation to it, and represent a fairly narrow range of temperatures one might experience in other environments, say, the surface of the planet Mercury.

    The same is true of our financial system. A certain amount of villainy always exists in the system; at any given time there may be more or less. We feel more comfortable in an environment with somewhat less villainy than there is currently. Those we have entrusted to suppress the villainy have not done an adequate job. Perhaps there is some hope that the cess pool will be cleaned up, but I for one am not making any plans.

  30. NMR says:

    The problem is mom and pop are way too tuned in to the media/political doom and gloom industry and/or their own, often political, prejudices. This site is hardly a stranger to a lot of specious moralising (eg. the fact that Apple was clearly oversold doesn’t mean a lot of other fundamentals don’t look quite good right now). It’s been obvious for months that provided the politicians didn’t blow the bus up (never a strong possibility) that there was a good chance of a strong equity rally in late 12/early 13 and considerable reweighting out of fixed income. Of course anyone expressing this view (as I did here in mid 12 to much clamor) was dismissed as an idiot or dupe of Wall Street, Bernanke et al. Consequently mom and pop forever miss the boat. As the sainted Krugman often points out economics is not a morality play. Unfortunately, mom and pop, and a lot of people who aught to know better, don’t understand this.

  31. NMR says:

    oops senior moment…..overbought.

  32. ByteMe says:

    Lance Armstrong called the market this morning.

    He wants his steriods back.

  33. James Cameron says:

    Well . . .

    Stocks Near New Heights as Small Investors Regain Faith

    “You’ve got a real sea change in investor outlook,” said Andrew Wilkinson, the chief economic strategist at Miller Tabak Associates.


    As always it will be interesting to see where this ends, but thus far the market has defied a lot pundits.

  34. NMR says:

    “but thus far the market has defied a lot pundits.”

    The opinions of the pundits by and large aren’t worth diddly squat. They’ve either got a pecuniary agenda if they come from the financial industry or if they are from the media are either totally clueless with soundbite platitudes, or again have some agenda (political this time). Some of them should be indicted for the quality of the advice they give which I’m sure a lot of the aforesaid mom and pops suck up like mother’s milk. Prospectuses are laden with warnings (not than anyone ever reads them) and the same warnings should be posted before Bartiromo, Kudlow or any of these other asses open their mouths.

  35. boveri says:

    Of course Mom and Pop will buy back in —– as usual at the top