Calling The Sheep To The Final Slaughter: Retail Dives Into Penny-Stocks—Y/Y Volume UP 40%

By Michael Krieger

It seems that no market tops until the bag has been fully passed to retail muppets, and we appear to be in the process of that happening right now. I have detailed this with regard to credit markets on several occasions, most recently with how Blackstone and other private equity firms are stuffing public pensions with their products using secretive and highly unfavorable terms. In case you missed it, I suggest reading my post: Leaked Documents Show How Blackstone Fleeces Taxpayers via Public Pension Funds.

Moving along to today’s story, we find that the retail investor is getting back into the stock market and is seemingly focused on the riskiest types of shares; unlisted penny stocks. They aren’t just dipping their toes in either, the pace exceeds that of the tech boom of the late 1990′s and has just hit the highest amount on record.

We learn from the Wall Street Journal that:

Investors are piling into the shares of small, risky companies at the fastest clip on record, in search of investments that promise a chance of outsize returns.

The investors are buying up so-called penny stocks—shares of mostly tiny companies that aren’t listed on major U.S. exchanges—at a pace that far eclipses the tech boom of the late 1990s. Those include firms that focus on areas from medical marijuana and biotechnology to fuel-cell development and precious-metals mining—industries that are perceived by some investors as carrying strong growth potential.

Average monthly trading volume at OTC Markets Group Inc., which handles trading in shares that aren’t listed on the New York Stock Exchange or Nasdaq Stock Market, has risen 40% this year in dollar terms from a year ago, to a record $23.5 billion.

The renewed interest in a market that used to be known as the pink sheets—because of the colored pieces of paper once used to record prices for unlisted stocks—shows investors are ramping up risk in a bid to boost returns as U.S. stock indexes are hovering near highs and stock valuations have risen above historical norms. 

Traffic on penny-stock trader forum InvestorsHub doubled between Christmas and last month, said Clem Chambers, chief executive of U.K.-based financial website, which operates the forum. He said people who have been registered members for years, in some cases a decade or more, account for three-quarters of the increase.

The rebound also comes as individual investors are showing signs of increased interest in stock trading in general. Discount brokers TD Ameritrade Holding Corp. and E*Trade Financial Corp. last month reported jumps in daily trading volume in the first quarter from the same period a year ago.

Keep dancing serfs.

Full article here.

Gotta Keep Dancing – Trading of Penny Stocks Soars to Record on OTC Markets