Allianz chief economic adviser Mohamed El-Erian argues apps like Robinhood are reducing the barriers to retail entry. He also provides insight into the coronavirus pandemic, initial jobless claims, earnings and how to allocate capital in the current market environment.

The 1990s were simpler times. The news was dominated by Bill Clintons various sexual escapades, but also a bubble in internet-related stocks that was partly fueled by thedemocratization of stock trading.

The latter inflated the stock market generally, and if youre old enough to remember, pretty much crashed it. Newbie investors took the brunt of the crash, with some losing their lifesavings, well after professional traders had sold their positions.

Now history may be repeating itself in the form of Robinhood,a stock-trading appthat has become something of a cultural phenomenon during the pandemic.

Robinhood now boasts 13 million users and growing about 3 million of those joinedsince COVID-19 hit.Bars and gyms are closed, people are in lockdown, but Robinhood gives you a chance to make money and a way to alleviate boredom.

Its aided and abetted by the massive government economic-relief effort that appears to make trading a no-lose proposition, enticing retail investors to flip stocks just like they did two decades ago.

During the dot-com era, there was a famous commercial of an office clerk teaching a C-suite executive how to trade online. Meanwhile, Robinhood is so easy to use that even a Luddite like me can set up an account and start trading stocks, options or cryptocurrencies in a matter of minutes, as I did in preparation for this story.

Plus its free, or at least thats the impression the company wants to give (there are no commissions, but Ill explain how the company makes money later).

Theres a lot to like about Robinhood. Its a clean, easy-to-use interface. You can even get a free stock for signing up. I received a free share of a company called Agenus, trading under the symbol of AGEN for $3.28, a company described in my Robinhood portfolio as a clinical-stage immuno-oncology company.

But the lure of Robinhood is also the lure of the roulette wheel you can make a lot of money, but youcan also lose a lotbecause trading isnt easy. Its something that is honed and perfected and even the best go through periods of losing money.

Of course, I found none of this on Robinhoods website. Nowhere does it tell me that my free share of stock is described by Wall Street pros as a speculative penny stock because it trades below $5 a share.

And that gets to the problem with Robinhood its built for the person who doesnt know a lot about the markets and doesnt ask a lot of questions.

Its also built for people who think they can trade like the big guys, people like Steve Cohen, Dan Loeb, Ken Griffin. To arm you against the professional, Robinhood gives users access to research and reporting in its news feed, but again, when much of this type of news hits the tape, the pros have already traded on it.

Thats not insider information, but the way the Wall Street information mill works. The big guys who pay the biggest commissions get the best info, not some guy trading a few shares of AGEN.

Robinhood is now valued at around $8 billion given its recent success, meaning its heading for a big IPO payday itself. You might ask how it makes money without charging brokerage commissions, and the simple answer is that it sells its trading-order flow to third parties that match buyers and sellers, a practice known as payment for order flow.

Big brokers pay Robinhood for order flow because they can trade out of these orders at huge profits, and given all the action on Robinhood, brokerages are clamoring for this business. In other words, nothing comes for free, and Robinhood users are the product, just like they are on Facebook.

Im not a Robinhood hater. Founders Baiju Bhatt and Vlad Tenev come from immigrant families and met at Stanford and created a great business designed to bring in those whove been left out of the system by making investing more approachable, a company spokesman tells me. Moreover investing is a worthwhile pursuit, and thats why there are mutual funds and index funds for the masses.

But there is a learning curve to buying and selling individual stocks, which isnt investing but the profession of trading. Thats how Steve Cohen makes $1 billion a year and can affordto buy the Mets.

Many eye 'Tik'ing a chance

The Microsoft bid to buy controversialsocial-media app TikTokis far from over, but already the tech giant is receiving interest from outside investors to join its bidding group, sources tell me.

These potential co-investors include General Atlantic Partners and Sequoia Capital, both current investors inTikToks Beijing-based parent, ByteDance, sources with knowledge of the matter say. In addition, dont be surprised if a big private-equity firm jumps into the group.

Keep in mind, a lot can happen between now and the time that Microsoft actually makes a bid. It is currently focused on TikToks US operations around 100 million monthly users, mainly Gen-Zers and social-media influencers in this country who use the short-video app to post everything from dance videos to commentary to political satire. But TikToks audience is expected to expand; sports franchises are said to be interested in posting.

That said, a Microsoft bid is far from a done deal. The company has looked at whether buying just the US portion makes sense since TikTok has 800 million users globally. Moreover, it will have to convince President Trump that the app issecure from Chinese influence.

While all this plays out, TikToks future in the US is ticking away.

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Robinhood app luring and robbing amateurs like in the dot-com era - Fox Business