Financial pundits have heralded the democratization of stock market investing with the creation and subsequent initial public offering of Robinhood.
The app, which allows stock, option and crypto trading from your phone, is said to be novel in the history of Wall Street.
Individual access to trading in securities and commodities has ebbed and flowed across many market cycles.
I won’t belabor the point by going all the way back to the formation of the New York Stock Exchange in 1792, but I will go back about 100 years.
The “roaring ’20s,” the great bull market that lasted nearly a decade, were known for infamous “bucket shops,” which invited folks off the street to trade stocks on margin. That is, investors borrowed from their brokers to buy stocks.
Historical accounts vary greatly as to just how many individuals bought and sold stocks during the 1920s. Many were burned by the Great Crash of 1929, having bought on margin and lost their stakes.
Speculation in the stock market in the 1960s by individuals reached historic proportions. The “go-go” mutual-fund era minted star money managers like Gerald Tsai, who ran the Manhattan Fund; Fred Carr, who ran The Enterprise Fund; and a young Peter Lynch at Fidelity Investments.
Of course, the 1960s were followed by the volatile ’70s during which individual investors, much as they had in the 1930s, lost interest in the stock market.
However, on May 1, 1975, the government deregulated fixed commission charges on Wall Street, leading to the rise of discount brokerage houses. This made it cheaper for individuals to buy stocks, and it’s among the more recent examples of the democratization of stock trading.
Trading volumes exploded as costs came down.
As markets began to recover from stagflation in the early 1980s, Wall Street, far more than Main Street, enjoyed a roaring bull market that lasted until the crash in 1987.
In the 1990s, lower interest rates, reduced taxes, and a wave of technological innovation hit Silicon Valley and Wall Street. A new boom began, leading to yet another mutual fund mania. In that environment, technologically sophisticated discount brokers like Ameritrade brought online trading to Main Street.
As the internet bubble began to inflate in 1995 with the advent of America Online, Netscape and Yahoo!, day-trading became a national pastime.
Multitudes of investors were trading hot dot-coms, regardless of whether they were profitable, had revenues, or even a market-ready product.
That market was “democratized,” only to wipe out many traders and investors when the bubble burst in the year 2000.
The peak of equity ownership, about 65%, last occurred in 2007, according to data from Gallup. Back then, individuals were flipping stocks on Wall Street and houses on Main Street.
The financial crisis of 2008 scarred that group of investors until this latest episode of what we again call “democratization.”
The Robinhood crowd, coupled with the Reddit Rebellion, has made day-trading both profitable and fashionable again, with very little attention paid to the history of speculative episodes like these.
This is not the first time that the little guy has seen the playing field leveled on Wall Street, and it won’t be the last.
But like all the others before it, it’s likely to tilt back in favor of the pros and hit the newly freed individuals in their pocketbooks.
Nothing is free, and nothing lasts forever.
The game never changes, as a 1920s Wall Street veteran told me decades ago – only the faces do.
Try to remember that when a new face emerges and claims you are now free to make your fortune.
—Ron Insana is a CNBC contributor and a senior advisor at Schroders.
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