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Why This Former Goldman Exec Is Worried About Flash-Mob Trading

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Fuel on fire is how economists and analysts have described the amount of stimulus injected into the economy since the start of the pandemic. 

As cash continues to slosh around at unprecedented levels, everything from meme stocks to Dogecoin is shooting higher – making it ever tougher for Wall Street to analyze and figure out risk.

"There's a lot of money trying to find opportunities, and that's paired with the growth of these low-cost retail trading platforms like Robinhood, and those platforms make it easy for flash mobs to kind of dynamically organize and transfer huge amounts of capital at Internet speeds," Higgins told TheStreet.

Related: Meme Stocks vs. Momentum Stocks: Jim Cramer's Definition

"So what ends up happening is you get these bubbles being created and popping, especially in less liquid asset classes like mid-cap stocks and commodities."

Key for investors, especially asset managers, is figuring out how to navigate those risks and ensure they are not getting swept up in a momentum trade - and more importantly having the tools and resources at their disposal to act swiftly, says Higgins.

"A key tool for risk managers going forward is figuring out how to predict which asset segments are going to be at risk for this kind of meme stock-style bubble," he said.

For more on how Wall Street is adapting to meme-inspired flash-mob momentum trading, watch the video above.

Related: Here's What Jim Cramer and the Pros Are Saying About Inflation

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