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The Stock Trading Niche Is Being Destroyed By Internet Algorithms (Why No Youtube Uploads) – Mike Swanson

I just went to my Youtube channel and looked and it has been twenty-two days since I have put up a Youtube video. The reason why is that I read an article in the WSJ last month that simply made me too disheartened to want to put another one up. I will eventually, but I’m not sure when.

I’ll get to the article in a minute, but it’s real importance is that it highlights what is really become a larger problem in the trading niche – and by niche I mean the market place of trading advice and commentary, whether that be free television trading “news” shows where people who don’t trade crypto tell you that you should own some, because the audience wants to hear that, or people selling trading services and newsletters, which is an industry I had been a part of for over twenty years, starting in 1999.

Back when I got into trading my entry was reading books of and about people who had been successful investors and traders. I’m talking about people like Peter Lynch, Jesse Livermore, Stan Weinstein, William O’Neill. One book that inspired me was the “Market Wizards” books, which consisted of interviews of people who all lost money learning and then made fortunes, becoming among the biggest hedge fund managers on the planet, once they recovered from those first losing experiences.

I didn’t really know what I was doing, as far as marketing, when I started to sell my own trading service in the year 2000. The internet was new and it was a time before even Google Adwords was around.

That didn’t come to around 2002.

It was a different world.

I ran ads on websites that had a simple link saying “Click here: Learn Technical Analysis.”

People clicked those ads and got on me email list. And some joined my service, and all those that did or didn’t had expressed an interest in learning.

About ten years ago that ad stopped working, because fewer and fewer people would click it. Interest shifted from a desire to learn to simply try to gamble and get rich. So, the few ads I run to get some new email subscribers now are all about stock picks.

The WSJ article highlights the social media trading stars of Youtube that have risen up in the past year and a half along with tens of millions of new Robinhood traders and few of them had any experience trading at all before their Youtube fame. Most of them are promising people to get rich talking techno babble investing, or to be told things like Facebook’s new Ray-Bans are cool (when they are instruments of slavery) as they hold shares of Apple, Amazon, and Facebook in their accounts, or crypto coin stories.

The biggest investing star right now on Youtube and really everywhere in the trading world is Cathie Wood, whose track record of the past, before 2010, is not so good, before her current reincarnation, but who has amassed billions of dollars in her funds by doing Youtube videos and interviews anywhere she can talking technobabble.

I think we have reached a moment where the trading world as a niche has been ruined. It no longer guides people in teaching them how to be successful in the long-run, but instead is now simply catering to what people want to hear – and that is promises of instant riches without work.

Of course, there has always been an element of that as there are similarities to trading and gambling and one can turn trading into pure gambling if one wants to, but over the years the get rich element has grown stronger to the point now where it has completely taken over the trading niche and there no longer is hardly any real or good information out there at all.

The type of services being sold have degraded in quality and so has the audience itself.

The WSJ article points out how the Youtube algorithm’s goal is to grow by pushing content that attracts as much attention as possible and keeps people on there for as long as possible. That means pushing videos that deliver messages that the majority of people want to hear and will enjoy.

In the trading niche, that means nonsense has now taken over. This isn’t simply the fault of people making the content, but is the effect of the algorithms. In fact the algorithms are forcing them to stoop to the lowest common denominator for views. Consider these select quotes from the article:

“Today, he’s MeetKevin, a YouTube influencer with 1.7 million subscribers. Most days, he live-streams on the platform for several hours, talking about the stock market and doling out investing advice in a rapid-fire, self-deprecating manner.”

“Mr. Paffrath says he earned $5 million in the first three months of this year, as page views and demand for his guidance have skyrocketed during the pandemic.”

“Traditional finance is a black box,” said Sarah Petite, a social-media consultant in Los Angeles. “This generation is looking at their parents and saying, ‘The way you thought about money? That isn’t how it works anymore.’ ”

Generation Z—roughly the cohort born between 1992 and 2002—is more likely to respond warmly to cultural signifiers of wealth like fancy cars and high-fashion clothes than they are to business degrees, financial certifications or a perch on a TV-news show, experts say. For that reason, there is big potential for fraud and financial ruin, said Ted Klontz, a professor of behavioral finance at Creighton University.

“My approach is a friendly approach,” Mr. Adams said. “The majority of my audience is young people who are looking for insight into financial markets or looking for ways to be more strategic about the investments they’re making, whether it’s NFTs, or crypto, or a founder’s story, and company culture…. I don’t like to think of myself as an expert.”

And read this on what happens if one simply tells their viewers to be cautious:

AMC’s stock was in the midst of a volatile week, but that day, it happened to close up 10%. Mr. Paffrath cautioned against buying AMC shares—hedge funds appeared to be buying up short positions in the stock, and its share price could collapse at any moment, he said.

“Why you gotta be so negative lol” asked a viewer in the video’s live chat.

“I’m not being negative, I’m just being realistic,” responded Mr. Paffrath. “Look, I want AMC to go to the moon, but all I’m suggesting here is, if you’re hanging your hat on something you don’t understand…you just want to be careful.”

After the live stream ended, Mr. Paffrath started shedding thousands of subscribers, he said. Most videos with positive titles garner more than 200,000 views, he says, while videos that have negative takes on a company or an industry in the title rarely get more than 60,000 views.

“I have to be an astronaut and show them that the rocket ship is fun, but you can’t look at that your whole life,” Mr. Paffrath said.

“I’ll play the momentum game, but let’s be real: True wealth comes from long-run interest. The trouble is, on YouTube, none of my videos about that kind of thing get any views.”

If someone watches a Youtube video that you put up and then you say something they don’t like and they react by leaving the video then the next time you upload a video Youtube may not show it to that person, instead showing them what they think they want to hear.

All of the major internet social media websites function like this – it’s an echo chamber that encourages people to spend as much time on it as possible, which drives isolation, and makes them addicted to the self-reflecting social media generated internet world in order to feel at ease over their isolation. Much has been written about how this is driving many to the extremes of the left or the right when it comes to politics, but it is a factor that has completely ruined the trading niche too. Oh, there is good information buried in reports, interviews, and so forth, but it is all being pushed out by the desires of the masses to hear the promises of riches over and over again no matter how silly.

Perhaps nothing more represents this than the type of wild talk we have heard about Bitcoin over the years. We were told that it represents freedom. Well, last week the country of El Salvador announced that it is making it a national currency along with the US dollar – and it is doing that by FORCING business owners to accept Bitcoin whether they want to or not. That is a restriction of choice, not an increase in choice. It is not freedom, but authoritarianism and puts businesses owners in that country in a position where they can go bankrupt by having to take a currency that has crashed 10% or more overnight in the past and will likely do so on them now at any time with no warning.

Imagine owing say $500,000 to the bank as a businessperson and then having the value of your money that you have generated collapse in weeks.

A lot of people will suffer from this in that country eventually, but Bitcoin people don’t care. And if you say anything negative about their virtual collectible coins they lash out like social media maggots do. All they want to do is believe anything, no matter how silly, that suggests that their coins will go up and make them rich, with no care of the consequences to those now forced to use them, in essence trapped in them. In El Salvador Bitcoin now equals slavery, not freedom.

What would it take for a crypto collectible coin to replace the dollar?

The answer is simple – it would have to be more stable than the dollar and easier for people to use. That is what it takes for a currency to replace another one by becoming more popular and widely used. Crypto collectible coins, of course, are more volatile than the US dollar and so the idea that one day replace it as the world’s reserve currency is completely absurd.

And few will say that on Youtube right now, because if they do they will be punished by the algorithm. As a result, most real investment advisors, traders, and market commentators on there simply choose NOT to talk about Bitcoin at all.

Perhaps a time will come when the trading niche will improve and get back to helping people learn and actually succeed in the markets instead of feeding them nonstop hype and nonsense, but that time probably won’t come until the trading niche as it is now is destroyed completely by a bear market.

I’m not going to stop writing about the markets when I have something to say about them. My website has become my own platform to write what I want write about and I am planning on making changes with it over the next few months to reflect more of what I am personally interested in and concerned about, and hopefully have a more positive impact than what is happening on most of the internet now.

I’d suggest reading the whole WSJ article here.