Three million new brokerage accounts were opened at Robinhood in the first four months of this year. Add in the collective two million new accounts at Fidelity, TD Ameritrade, and E-Trade in the first three months of this year and it’s easy to piece together the narrative that free time + stimulus checks = new money in the market. Day trading hasn’t been this popular since 1999, or has it?

Day Trading often conjures up images of the US tech bubble in the late 1990s and early 2000s, and we commonly associate day traders as being the last ones to the table in the midst of a bull market, but the example of Japan in from 2005-2007 may be more relevant to us today.

Nikkei 225

1990 – Today
Chart via Macrotrends

Nasdaq Composite

1990 – Today
Chart via Macrotrends

The Nikkei 225 Index began to turn from a decade-long decline in 2003 and by mid 2005 it had nearly doubled. New account openings went through the roof, and the preponderance of online trading made it easier than ever for individuals to get involved in the market. In 2006, The New York Times did a spotlight on the trend that reads like it could have been printed today with just a few minor updates. 

Had the Japanese market turned around from it’s ‘lost decade’ when day traders got involved? Not quite – the Nikkei was not immune to the 2008 Financial Crisis, and set new lows before finally recovering in 2013, actually making it one of the later markets to turn the corner. Rather than being too late like the US day traders of 1999, perhaps the Japanese traders were too early.

What will become of the day traders of late? Will they continue to look like geniuses who beat bitter Wall Street Pros at their own game or will they succumb to the same fate of yesterday’s day traders who found their timing within the macro business cycle to be less than impeccable? We looked at the comments two voices, Dave Portnoy and Leon Cooperman, have been making in the news.

“It’s the combination of no sports — so you can’t bet on that — and you can’t go outside. There’s a lot of people sitting in front of their computers who ordinarily can’t be day trading”

Dave Portnoy, Barstool Sports Founder and Day Trading Commentator

Dave Portnoy, CEO of Barstool sports, also known as ‘Davey Day Trader’ has made a name for himself on his blog and on CNBC lamenting the closure of sports betting outlets and comparing his recent moves in the market to those of Warren Buffett. In a bit of a nod to the populist sentiments of the era, Portnoy is quick to point out that the ‘Suits’ are not the only people who can successfully invest and sees a cultural revolution within the investment business.

“They are just doing stupid things.”

Leon Cooperman, CEO of Omega Advisors and Billionaire Investor

Leon Cooperman, whose successful career as a hedge fund manager has made him one of the most widely followed personalities on Wall Street, has emphasized how these new traders do not understand the basic capital structure of companies, and their investments in airlines and travel-related companies in particular are far riskier than they understand. The herd mentality, combined with this lack of knowledge, will end badly in Cooperman’s view – it’s just a question of when.