Are Retail Investors About To Be Blown Up?
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Are Retail Investors About To Be Blown Up?
You know the stock market is frothy when your doorman or landscaper is bragging about how much they made in the stock market this year buying artificial intelligence (AI) stocks.
Retail investors have plowed into AI and AI adjacent stocks. Of course some of these companies will continue to do very well and others are all hype.
For example, allegations of investment fraud have been leveled against an AI company called “Builder.ai” which recently filed for bankruptcy. Supposedly, Builder.ai claimed to be able to build apps faster and cheaper than the competition with unique AI capabilities. In reality, it was largely developer driven. Sadly, this will be the first of many casualties in the ever so hot AI space.
Retail customers have also flocked to private equity investments that have had spectacular failures such as First Brands and Tricolor. JP Morgan’s Jamie Dimon commented that there are likely more ”cockroaches” in the private equity space.
We’ve seen this movie before and know that it ends badly for mom and pop investors.
In 2000, the Nasdaq “dot com bubble” burst resulting in customer losses of 80% or more.
In 2008, the Great Financial Crisis wiped out investors holding once solid bank stocks such as Lehman Brothers, Bear Stearns and Wachovia.
In a new book on the Great Depression titled “1929”, noted financial author Andrew Ross Sorkin observed that he fully expects an AI market crash—he just doesn’t know when and how bad it will be.
Retail investors whose brokers pushed them to put a large percentage of their portfolios in AI stocks would be wise to consult with an investment fraud attorney.
More By This Author:
The Easterly Fund Goes South
Private Equity Dumped On The “Dumb Money” Crowd
Investor Rights In A Margin "Blowout"
Disclaimer:This article does not contain investment, tax or legal advice.
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