For Main Street, Stocks Are Out; ‘Sharing’ Is In

Originally posted 07/24/2014 on http://blogs.wsj.com by Paul Vigna . Read the original article at http://blogs.wsj.com/moneybeat/2014/07/24/for-main-street-stocks-are-out-sharing-is-in/

Wall Street has lost Main Street.

Anecdotally at least, that may seem obvious. Trading volumes at the big banks have been down. If the equities market was crashing, or just in a long-term downspin, that might be easily understandable. But the market has been on a five-year trip higher. Headline after headline proclaims the latest stock-market record. That has some asking whether or not it’s a permanent drop.

After two historic market crashes that wreaked havoc upon millions of people’s retirements, after a financial panic that sparked a deep recession that wiped out tens of millions of jobs, after the flash crash, and high-frequency trading, and dark pools, and…well, it is hardly any wonder the average investor hasn’t come back to the market? The question is, if they’re not going to the market, where are they going?

The markets team over at ConvergEx took a stab at answering that question. In a new research note, the ConvergEx team argues that people have lost faith with the stock market as a source of wealth, and have turned to new technologies to secure their own futures. “After the financial crisis, many individuals lost interest in traditional financial assets and channeled their attention towards investing in themselves,” the firm wrote in a note to clients

“We took a Big Data plunge—using Google GOOGL +0.25% Trends—to assess the ebbs and flows of interests and behaviors over the past eight years,” the group wrote. While it’s certainly not conclusive, the results are indicative of a broad change occurring.

Interest in traditional financial assets – stocks, bonds, mutual funds – is down 19%, according to the data from Google, since 2006, while interest in “human capital – schooling, languages, start-ups – has jumped 359%. Searches for “start a business” or “open a store” have spiked since the crisis. Part of this is not just a response to the crisis. Technology has made it easier than ever to access capital. Crowdfunding, seed funding, Kickstater, these are all growing, real trends.

“Given the shift of interest from investing in financial assets to investing in oneself, coupled with a greater propensity to assume life changes post-financial crisis, it seems people are relying on their own human capital and individual efforts as opposed to companies in the form of stocks or bonds.”

This is the essence of what’s called variously the sharing, peer-to-peer, or collaborative economy. Technology and the wreckage of the financial crisis are fueling it. Lyft, which began in the summer of 2012 and provides a way to match “community drivers” with passengers, is a prime example of this trend, but there are others, of course: Uber, another ride service, and Airbnb, which gives people a way to make money off their own homes and apartments. Another is called ShareDesk, a Vancouver start-up that matches people looking for cheap office space with hosts who have extra office space; it’s basically described as Airbnb for offices.

Some corners of corporate America have caught onto the trend. U-Haul UHAL -0.01%, the ubiquitous truck-rental service, started what it calls its “Investors Club.” It’s a way for the company to essentially do its own crowd funding. For as little as $100, investors can buy asset-backed securities issues directly by U-Haul’s parent company, and backed by all manner of company assets, from individual stores to individual trucks.

In other words, this isn’t some far off trend; it’s happening now (spend any time on our Accelerators blog, and you’ll see it talked about), and it’s a business model that’s going to have a strong attraction to Millennials who came of age during or after the financial crisis, are comfortable with technology and social media. They are open to different ideas about how to do things, and gravitate naturally to tech-based ideas.

The interesting takeaway from the ConvergEx note is that this trend may be seeping into the capital markets, and actually taking business away from it. Food for thought.