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Billionaire investor Leon Cooperman says the rise of Robinhood traders will ‘end in tears’

Billionaire investor Leon Cooperman says the rise of Robinhood traders will 'end in tears'

The rise of mom-and-pop investors in the stock market will ‘end in tears,’ warns billionaire Cooperman

Amateur investors have been piling in money into different stocks and taking advantage of the market crash over recent weeks, but the billionaire investor Leon Cooperman has rebuked these gains and believes they will “end in tears.”

Cooperman, who is the chairman and chief executive of Omega Advisors, told CNBC’s “Half-Time Report” on Monday: “They are just doing stupid things, and in my opinion, this will end in tears.”

Robinhood traders are betting on how high they can push the stock before it collapses. 

Record savings, stimulus checks, low interest rates and even lockdown boredom in the wake of the coronavirus outbreak have all been cited by market pundits as possible explanations for the extraordinary move.

‘The gambling casinos are closed and the [Federal Reserve] is promising you free money for the next two years, so let them speculate,’ Cooperman said, referring to the central bank’s ballooning balance sheet.

‘Let them buy and trade. From my experience, this kind of stuff will end in tears,’ Cooperman said. 

The famed investor referred to the online trading platform Robinhood’s surge in account openings, with more than 3 million new accounts created this year. 

Robinhood has more than 13 million users, with an average user age of 31. 

A number of recent reports attribute the market’s rally since its March 23 low, and its subsequent choppy trading, to an era of zero-commission discount brokerage trades, ushered in by Charles Schwab SCHW-0.22% and platforms like Robinhood that cater to younger investors.

Critics like Cooperman say that a dearth of diversions due to COVID-19 lockdowns and unemployment have created a perfect environment for newly minted day traders to wreak havoc on Wall Street.

On Monday, Cooperman pointed to purchases of bankrupt car-rental company Hertz Global Holdings Inc. HTZ-8.99% which has drawn feverish buying interest from bargain-hunting investors, even though the company’s bankruptcy means that there is little if any equity value in the enterprise.

“For all the mocking of Robinhood investors, their timing back into the market looks impeccable, with a significant pick-up in holdings as equity markets bottomed in mid-March,” Andrew Lapthorne of Societe Generale wrote.

But Peter Cecchini, the former global chief market strategist at Cantor Fitzgerald, said the actions of Dave Portnoy, the founder of Barstool Sports, a punter turned investor, were symptomatic of the dislocation between stock prices and economic reality.

Last week, an obscure Chinese online real estate company’s American depositary shares jumped as much as 1,250 percent.

Market watchers attribute the surge to retail investors confused about the company’s name, FANGDD Network, which is similar to the FAANG acronym used to describe tech giants Facebook, Apple, Amazon, Netflix and Google.

FANGDD issued a statement on Wednesday warning investors the trading price of its ADSs ‘could be subject to significant volatility for various reasons that are out of the company´s control.’

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