A Composite of Wall Street’s ‘Young Wolves’
Published in Les Échos
(France) on 22 September 2016
by Nessim Ait-Kacimi (link to original)
Young, audacious, and sometimes unscrupulous, these traders in "short trousers" are the media’s new darlings who dream of becoming the new Soros.
Manuel E. Jesus, 19, was fined $1.5 million by the Securities and Exchange Commission which regulates American financial markets for having embellished the productivity results that he presented to attract clients. Under a pseudonym, he created stock recommendations in correspondence between 2012 and 2014 while he was still a minor. And these recommendations were unconnected to his real investments. This is far from an isolated case, and the SEC is closely monitoring young prodigies who have a tendency to take liberties with the law.
Self-Taught and Fearless
These young, self-taught traders who love technical analysis are the children of the democratization of access to markets and technological advances. They have their informal club, the “Leaders Investment Club,” which unites around 100 young traders and investors, and was founded by Austin Schwab and Julian Marchese, who began trading at the age of 10. They speculated from their childhood bedrooms, under the sometimes loving and admiring watch of their families. This is the case for Connor Bruggemann, a 16-year-old from New Jersey, who in less than a year, claims to have multiplied his starting capital of $300,000 thirty-fold by speculating on low value stock also known as "penny stocks," a very reckless method.
As his father is a former floor trader on the New York Stock Exchange, it is arguably a genetic predisposition. Bruggemann’s father did, however, act reasonably when his son’s school complained about his son sending out purchase orders in the middle of class. People under the age of 18 cannot open a trading account online without parental authorization, and it is their parents who are responsible for any losses incurred by their offspring. “I’m not supervising him as much as I should," Bruggemann’s father admits with regard to his son’s E-Trade account, but he remains convinced of his son’s talent and sense of responsibility.
Precocious Talent
Many big traders, with the exception of George Soros, have indeed been precocious. Michael Platt, founder of BlueCrest Capital Management, which later transformed itself into a “family office” recounts how “when I was 12 or 13 years old, I got a copy of this magazine called Investors Chronicle … By the time I was 14, I knew every single stat on every single company … I was just buying all of the stocks when they went public. I must have made £20,000 to £30,000.”* Young traders remain a minority. In Asia (China, Taiwan, etc.), those under the age of 25 represent around 3 percent of amateur traders on online trading sites. According to a survey in 2014 by Havas Worldwide, only 2 percent of individual shareholders are between 18 and 24 years old, and 9 percent are between 25 and 34 years old. After trading in technology stock during the internet bubble, that stock being the currency in the second half of the 2000s, young prodigies dream today of being the descendants of Soros and no longer have any taboos or limits (with respect to shares, derivatives, and raw materials.)
Overly Confident and Insufficiently Diversified
Youth was an advantage when working on the trading floors (which are now in decline), providing greater resistance to the long hours of stress and activity. However, precocity has the reverse effect. Indeed, according to the study of behavioral finance, the younger traders are, the more likely they are to be self-confident and take risks, and they are hardly diverse. They are also more active than others, which explains why online traders approach them. Their success leads to unexpected publicity for these websites, which portray them as heroes. But their stories are often too good to be true. Such is the case with Mohammed Islam, 17, who was presented as the new trading prodigy by the American press, which went gaga for the $72 million he earned through speculating on gold and petroleum. In the end, it turned out that this story was entirely invented by a pathological liar of an adolescent who had yet to be discovered. Unlike their more discreet older counterparts, young traders seek out the media spotlight as much as they seek out the adrenaline of trading. Former actress Rachel Fox, who made appearances in the TV show “Desperate Housewives,” and known as the “desperate trader,” had another consuming passion, share trading. At 16, she claimed to have achieved excellent results and launched her trading advice site, “foxonstocks.com,” which states that it is “guided by the power of pop culture.”
*Editor’s note: At current exchange rates as of Sept. 26, 2016, this would be the equivalent of $26,000 to $39,000. The amount quoted may have been significantly different.
Manuel E. Jesus, 19, was fined $1.5 million by the Securities and Exchange Commission which regulates American financial markets for having embellished the productivity results that he presented to attract clients. Under a pseudonym, he created stock recommendations in correspondence between 2012 and 2014 while he was still a minor. And these recommendations were unconnected to his real investments. This is far from an isolated case, and the SEC is closely monitoring young prodigies who have a tendency to take liberties with the law.
Self-Taught and Fearless
These young, self-taught traders who love technical analysis are the children of the democratization of access to markets and technological advances. They have their informal club, the “Leaders Investment Club,” which unites around 100 young traders and investors, and was founded by Austin Schwab and Julian Marchese, who began trading at the age of 10. They speculated from their childhood bedrooms, under the sometimes loving and admiring watch of their families. This is the case for Connor Bruggemann, a 16-year-old from New Jersey, who in less than a year, claims to have multiplied his starting capital of $300,000 thirty-fold by speculating on low value stock also known as "penny stocks," a very reckless method.
As his father is a former floor trader on the New York Stock Exchange, it is arguably a genetic predisposition. Bruggemann’s father did, however, act reasonably when his son’s school complained about his son sending out purchase orders in the middle of class. People under the age of 18 cannot open a trading account online without parental authorization, and it is their parents who are responsible for any losses incurred by their offspring. “I’m not supervising him as much as I should," Bruggemann’s father admits with regard to his son’s E-Trade account, but he remains convinced of his son’s talent and sense of responsibility.
Precocious Talent
Many big traders, with the exception of George Soros, have indeed been precocious. Michael Platt, founder of BlueCrest Capital Management, which later transformed itself into a “family office” recounts how “when I was 12 or 13 years old, I got a copy of this magazine called Investors Chronicle … By the time I was 14, I knew every single stat on every single company … I was just buying all of the stocks when they went public. I must have made £20,000 to £30,000.”* Young traders remain a minority. In Asia (China, Taiwan, etc.), those under the age of 25 represent around 3 percent of amateur traders on online trading sites. According to a survey in 2014 by Havas Worldwide, only 2 percent of individual shareholders are between 18 and 24 years old, and 9 percent are between 25 and 34 years old. After trading in technology stock during the internet bubble, that stock being the currency in the second half of the 2000s, young prodigies dream today of being the descendants of Soros and no longer have any taboos or limits (with respect to shares, derivatives, and raw materials.)
Overly Confident and Insufficiently Diversified
Youth was an advantage when working on the trading floors (which are now in decline), providing greater resistance to the long hours of stress and activity. However, precocity has the reverse effect. Indeed, according to the study of behavioral finance, the younger traders are, the more likely they are to be self-confident and take risks, and they are hardly diverse. They are also more active than others, which explains why online traders approach them. Their success leads to unexpected publicity for these websites, which portray them as heroes. But their stories are often too good to be true. Such is the case with Mohammed Islam, 17, who was presented as the new trading prodigy by the American press, which went gaga for the $72 million he earned through speculating on gold and petroleum. In the end, it turned out that this story was entirely invented by a pathological liar of an adolescent who had yet to be discovered. Unlike their more discreet older counterparts, young traders seek out the media spotlight as much as they seek out the adrenaline of trading. Former actress Rachel Fox, who made appearances in the TV show “Desperate Housewives,” and known as the “desperate trader,” had another consuming passion, share trading. At 16, she claimed to have achieved excellent results and launched her trading advice site, “foxonstocks.com,” which states that it is “guided by the power of pop culture.”
*Editor’s note: At current exchange rates as of Sept. 26, 2016, this would be the equivalent of $26,000 to $39,000. The amount quoted may have been significantly different.
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