Chairman and Founder of Interactive Brokers Group Thomas Peterffy sits down with Yahoo Finance Editor-at-Large Brian Sozzi to discuss IBKR’s new GlobalTrader app, the state of the stock market, and the Russia-Ukraine war.
BRIAN SOZZI: Joining Yahoo Finance Presents now is Interactive Brokers Founder Thomas Peterffy. Thomas, good to see you and good to get some more time with you. You’re always on with us and it feels like we’re blocked off in five minutes and then you leave us. So good to get some time with you here and especially to talk about your new Global Trader app. Why did you launch it, and who are you targeting with it?
THOMAS PETERFFY: So the typical Interactive Brokers customer is somebody who proactively analyzes the markets. And we provide them with a great deal of information, and data, and research, and trading tools to have them to achieve whatever their objectives may be. So it’s a very feature-rich platform that often scares away people who are not experienced as self-directed investors.
The Global Trader that you can download from the App Store is for beginners in the self-directed investor space. So these are people who may have been investing for many, many decades, but they are not really good in self-directed with tools. And so we needed to introduce to them a very, very simple interface.
And, of course, but this also works very well for people who are on the go and they just want to check on their portfolio quickly or they want to do a quick trade. So it’s an extremely simple to open account and to trade and to begin learning about investing in baby steps. We also provide a wonderful path for people to learn the platform and to start as beginners and go on to reach different levels of sophistication.
BRIAN SOZZI: Thomas, I was on the platform. It’s slick, it’s easy to use, to your point. It’s a very interesting offering. As someone who has been around this industry for so long and pioneered so many advances, has it become too easy to trade stocks?
THOMAS PETERFFY: Well, yeah, it’s become very easy to trade stocks. But that doesn’t mean that people will just take crazy shots. I mean, at least I don’t– I hope that our customers don’t do that. But, you know, we have to– it’s not different than you are able to pick up your phone and call your broker and say, buy me a million shares of whatever.
BRIAN SOZZI: Have you– we’ve talked to you every step of the way throughout the pandemic, this rise in volatility when it has come, this rise in these next generation of investors. Are you surprised by how significant the retail investor remains engaged with the market here?
THOMAS PETERFFY: It’s basically because the market hasn’t really come down very much. So and even the meme stocks haven’t come down very much. I mean, you know, GameStop is still $80 a share. It’s crazy.
So what generally has happened in the past that retail investors became very, very active in an upmarket, and then when the market suddenly crashed, they would stop coming to the market for several years. But we haven’t seen that kind of a crash yet.
BRIAN SOZZI: Do you think we’re– you know, there’s just so many things coming at investors right now, Thomas. The threat of higher interest rates, and to your point, a lot of investors haven’t seen this dynamic in some time. How do you think that will influence the markets?
THOMAS PETERFFY: Well, you know, there are– and this is further complicated by the Ukraine. So there are several ways. I mean, there are basically two bold camps. Some folks believe that they should sell now because they will have plenty of opportunity to come back into the market later.
This year, of course, is further encouraged by the possibility that China may come closer and closer to Taiwan. Also there is a lot of leverage in the system as the Fed begins to raise rates. We’ll be looking at bankruptcies maybe among many of the private equity firms that are invested on high leverage and in several businesses that basically are not– will not be able to pay the interest.
On the other hand, you know, we have this– and, of course, the Ukrainian war can get much worse. But on the other hand, as the two sides in this war are approaching exhaustion on both sides and negotiate, that settlement becomes ever more likely. And a good framework for that already exists. And the ongoing fighting is mostly about the details of where exactly the borders will be drawn, and how the neutrality of Ukraine will be guaranteed, and how to draw the EU and the US into a peace agreement so that the existing sanctions will be withdrawn.
This possibility is encouraging people to, like today, as the market is up now, the S&P is up 70 points, it encourages people to buy, going back into the market and especially to buy previously highflying companies with bright, bright prospects that although they have had no earnings, they are now down 50%, 60%, 70%. So we see people nibbling at those.
I believe that the safest strategy in these markets where the market can move a great deal in either direction, it’s hard to tell where you are, I think the safest strategies to employ is vertical option spreads, where your exposure is very, very limited. And should you be able to catch the market in the right direction, you can make very, very decent profits.
And here I’m talking about selling near strike puts or calls and buying further out of the money puts or calls to hedge yourself. And depending upon what your sentiment is, you either do this with puts or calls. And that way, if you’re right, you can make a decent amount of money and your exposure, as I said, is limited.
BRIAN SOZZI: You mentioned the Russia-Ukraine war. In prepping for this, Thomas, I quote a recent op-ed that you wrote for “Barron’s.” It was pretty amazing but also highlighted your upbringing, going to breadlines when you were the age of seven in socialist Hungary. Suffice to say, a lot of folks have not had that same experience. Where is your–
THOMAS PETERFFY: That’s a lot to think.
BRIAN SOZZI: Yeah, I can tell you I have not had that experience, it’s just the reality. Where has your head been over the past few weeks as this situation has been playing out?
THOMAS PETERFFY: Well, I feel extremely sympathetic, to tell you frankly, to both sides, because [AUDIO OUT] when the Russian tanks in 1956 there was an uprising in Hungary, and the Russians who were in Hungary at that time were beaten back to their barracks. And then fresh troops came in with these tanks over there and well, of course, they were– in those days they had no anti-tank weaponry. So a tank would do anything they wanted.
So the only weapon that sometimes worked was Molotov cocktails. And the top of the tank was open and you could loop it in so it could fall into the tank. It was horrendous and it exploded. So I remember I climbed up a couple of occasions on these tanks, and I looked in, you know, there were disabled tanks where everybody died. And I looked in and there were those charred bodies inside. It’s just horrible.
But at any rate, to come back to the current situation, now, of course, it’s awful for the Ukrainians to be in these buildings and have them come down upon them. It’s surprising how few casualties there have been so far. I mean, given that we see all these buildings collapsing and the casualties are still in the thousands, it’s just– I mean, it’s horrible but it’s surprisingly small.
And on the other hand, you look at these Russian kids, 18, 19, 20-year-old kids who don’t even know where they are supposedly and, you know, they sit in these steel boxes that if they run out of fuel, they can drown the tanks and they become incredibly cold in there. It goes well below zero. And they can’t get out to even go to the bathroom, and they’ve been sitting in there weeks and on. So it’s horrible on both sides. And that’s why I say that a peace negotiation, I think, is in the cards probably.
BRIAN SOZZI: It’s always good to get some time with you. I know you’re a busy guy. We greatly appreciate you coming on Yahoo Finance all these times. We’ll talk to you soon.
THOMAS PETERFFY: Thank you very much.