Former TD Ameritrade CEO Fred Tomczyk told CNBC on Friday that he believes private equity investors have never had it better when it comes to competing with Wall Street professionals.
“When you think about what the retail investor has today, they have free trading, free research, free investor training, and faster and better transaction execution than ever before,” Tomczyk said in an interview about “Squawk on the”. Street “.
“The playing field between the retail and institutional investor is more even than I’ve ever seen,” added Tomczyk, who led the brokerage firm as president and chief executive from 2008 to 2016. He is now on the board of Cboe Global Markets. . .
Tomczyk’s comments came a day after the US House Committee on Financial Services held a hearing on the GameStop short squeeze that began in late January. The Reddit-fueled trading frenzy was another flashpoint in a long-running debate about fairness in the stock market and whether mom-and-pop investors have equal access to generating returns.
One of the attendees in Thursday’s hearing was Keith Gill, the Reddit user and YouTuber who played a key role in promoting GameStop stock. In his testimony, Gill defended his decision to publicly raise his investment thesis in GameStop by noting what he viewed as long-standing imbalances for retailers.
“Hedge funds and other Wall Street companies have teams of analysts who work together to compile research and analyze company stocks,” said Gill, whose latest post on Reddit showed he made $ 7.8 million with GameStop. “Individual investors don’t have those resources. Social media platforms such as Reddit, YouTube and Twitter are leveling the playing field.”
In August, Gill posted a video on his YouTube channel claiming that the video game store’s stock was undervalued and vulnerable to a short press due to so many bearish bets placed against it.
Tomczyk said he finds the success of individual investors during GameStop’s soaring stock – which went from less than $ 20 in early January to an intraday high of $ 483 on January 28 – remarkable.
“The ironic thing is that if you step back and look at all this, the party seems to have lost the most in this GameStop trade was in fact a hedge fund. It was not a private investor,” said Tomczyk. “A lot of retail investors have done really well, so I think they’ve done really well and never had it better based on smart regulation and the use of technology today.”
Other attendees in Thursday’s committee hearing included Gabe Plotkin, who runs hedge fund Melvin Capital, and Ken Griffin, the billionaire founder of market maker Citadel Securities. Griffin is also CEO of an eponymous hedge fund, Citadel.
Melvin Capital suffered a massive loss during the GameStop frenzy after closing its short position on January 26. Short sellers borrow shares of a stock and then immediately sell them, with the aim of buying them back later at a lower price. They then return the borrowed shares and make money off the difference. But when the opposite happens, as with GameStop, short sellers can buy shares at their current higher price in an effort to minimize losses.
Plotkin told Congress on Thursday that his hedge fund will adjust its short-selling approach as it observes the impact social media can have when used by retailers. “That was a risk factor that we had never seen until recently,” he said.
In an interview on CNBC Friday, Griffin was asked by “Squawk Box” co-presenter Andrew Ross Sorkin if he and individual investors had “the same opportunity” to make money in the stock market.
“It all comes down to a matter of horizon and strategy,” said Griffin. “It’s like asking, ‘If I were to play golf with Tiger Woods this weekend, would I win? Of course not, but there are several ways to compete with Tiger Woods off a golf course and do really well. not to play him at his game on his court. “
For example, Griffin said that people who happen to be tech-savvy see opportunities to invest in listed companies that are disrupting a particular industry. Or, he said, someone who bought Tesla stock five years ago, believing electric vehicles to be the future of the auto industry, “would have made a lot more money than we at Citadel.”
Tesla’s stock is up more than 2,200% in the past five years.
“I never underestimate the US retail investor’s ability to understand emerging trends where real wealth is created and their ability to capitalize on that wealth transformation,” added Griffin.