Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A6864208161574854657
#Fed says #Meme #stocks like #GameStop, #AMC pose #risks to #financial #structure #stability: https://lnkd.in/eFKDQiHe :
Federal Reserve System: Financial Stability Report: PDF: https://lnkd.in/e3JmYd68 : This report summarizes the Federal Reserve Board’s framework for assessing the resilience of the U.S. financial system and presents the Board’s current assessment.
HTML: https://lnkd.in/exiEf_Zm
#Stock-#market #volatility resulting from a surge in first-time #investors who congregate on #social #media could pose a #risk to the U.S. financial system, , the Federal Reserve said in its biannual financial stability report. The report noted that new #trading #platforms that offer #zero-#commission #trading, #fractional #shares and #flashy and #engaging #graphics ( #gamification #nudge ) have helped recruit a #generation of #young #traders ( #GenZ #Millennials ) to the stock market, and the #size of this #new #demographic makes it important for #regulators to monitor.
ref: #BlackSwan: #WidomOfTheCrowds or #HerdsToTheSlaughter:
“#Social #media can contribute to an #echo #chamber in which retail investors find themselves communicating most frequently with others with #similar #interests and #views, thereby enforcing their views, even if these views are #speculative or #biased.” it is an area of the market that should be “monitored” because #new, #younger #equity #investors tend to have #higher #debt #levels and often invest in #options, two factors that could amplify losses in a downturn.
(#ZIRP #Easy #Interest #Rates => #Economic #Flashpoints: #Record #High #Household #Debt: https://lnkd.in/eJJFHQ6V and #Record #High #Margin #Debt: https://lnkd.in/eJPyzuEF)
“Episodes of #heightened #risk #appetite [fueled by near #ZIRP #interest #rates and #easy #credit] may continue to evolve with the interaction between #socialmedia and #retaile #investors may be difficult to predict,” the report warned. “A #potentially #destabilizing #outcome could emerge if elevated risk appetite among retail investors retreats rapidly to more moderate levels.”
The #Fed suggested that #financial #institutions calibrate for the potential #increased #volatility that the #meme #stock phenomenon could endanger and that “more frequent episodes of higher volatility may require further steps to ensure the #resilience of the #system.”
Other #vulnerabilities to the #financial #system outlined in the report include #high #valuations for #stocks and #realestate, which remain elevated relative to #corporate #earnings and #rents.
#Reddit aficionados think #central #bankers might finally be catching on to the game: https://lnkd.in/eN5UTR2i:
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