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Economic expert Mohamed Al-Erian said the phenomenon of the business craze fueled by social networking platform Reddit against Wall Street gamers, indicating that he fully understands the reasons for this anger.
In an interview with ABC News, Al-Erian said the trading frenzy came out of nowhere and regulators were now torn between seeking to protect the small investor or tackling cases of potential market manipulation. From what was reported by “Business Insider” and seen by “Al Arabiya.net”.
Al-Erian put the factors behind the fear and anger between “Main Street” and “Wall Street”, summing them up as inequality of wealth, income and opportunity.
Al-Erian explained that three factors explain the confidence of small individual investors in the war on the financial system. First: they have more money, because household consumption has been reduced. Second: Reddit provided them with a coordination forum. Third, Robinhood and other easily accessible brokerage firms have lowered barriers to entry.
But there are risks associated with the unprecedented liquidity trading frenzy littering the economy. According to Al-Erian, “I think the lesson learned from the last few years is that the fundamentals are good, but that’s not what moves the markets.”
He pointed to the huge wave of liquidity, which will eventually break, but it may take a while, which has separated financial markets from fundamentals.
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