Meme Stocks, GameStop, Short Squeezes, and Bubbles

Money For the Rest of Us

J. David Stein

Investing, Investing Podcast, Business, Economics, Economy

4.5 • 1.4K Ratings

🗓️ 27 January 2021

⏱️ 32 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

How coordinated buying by retail investors has turned the table on Wall Street. Are there signs of a market bubble?

Topic covered include:

What are meme stocks
Why GameStop's stock (GME) has soared to over $300 from $17 in less than a month
What are short squeezes and gamma squeezes and how they can push up a stock price
How short-sellers including hedge funds are losing big against individual investors on the wallstreetbets subreddit
Is coordinated buying of options and stocks by individual investors illegal?
How market flows into stocks are taking precedence over fundamental data
Is the stock market in a bubble and how does the current market environment compare to the 1999 Internet bubble and the 2006 housing bubble?

Thanks to Truebill for sponsoring the episode

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Show Notes

r/wallstreetbets

FOR POSTERITY—Almost Daily Grants 1.25.21

GameStop can’t stop going up by Jamie Powell—Financial Times

Reddit: bull attack by Jamie Powell and Philip Stafford—Financial Times

How WallStreetBets Pushed GameStop Shares to the Moon by Brandon Kochkodin—Bloomberg

Submit Your Pick for the Next Meme Stock Here posted by u/AssPowers 2/18/20—r/wallstreetbets

17 CFR § 240.10b-5 - Employment of manipulative and deceptive devices.—Legal Information Institute

How'd You Guys Manage to Win so Big it Made These Old Guys Drown in Their Tears? posted by u/bawse 1/24/21—r/wallstreetbets

Five Things You Need to Know to Start Your Day by Cormac Mullen and Tracy Alloway—Bloomberg

Tweet by Paul Kedrosky (@pkedrosky) on 1/25/21

Baupost’s Seth Klarman compares investors to ‘frogs in boiling water’ by Ortenca Aliaj and Eric Platt—Financial Times

US stock rally drives ‘ludicrous index’ towards dotcom era heights by Eric Platt—Financial Times

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Transcript

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0:00.0	Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it and how to live without worrying about it.
0:10.0	I'm your host David Stein. Today's episode 329. It's titled,
0:15.0	Mem stocks, short squeezes, and is there a bubble?
0:20.0	Yesterday on the money for the rest of us Plus member forums, a member posted my entire
0:26.9	investing life I've been following the general concepts fire, bogeglehead mentality
0:32.4	passive index investing.
0:34.0	It's done well for me and I understand it analytically.
0:38.0	Sometimes I varied my asset allocation based on conditions which is why I like the Plus membership when I found it.
0:44.8	I own a few individual stocks, but overall I probably vary my portfolio less than David.
0:50.8	For fun, the member continues, I've been a long time reader of an internet stock picking site,
0:56.4	but recently decided to dip my toes in the water, and it's been very profitable.
1:01.6	The site is Wall Street Betts. It's a subreddit. It started in 2012 and it has 2.3 million
1:09.3	members. The member continues. A few months ago I decided to buy some calls on Tesla based on the recommendations there and sold after I made a hundred percent gain in less than a week. I could have made a lot more. Likewise, this week I put only 1% of my net worth in GME,
1:27.6	GameStop shares, and sold after a 50% gain in a couple of hours. It was up 70% at one point. There's plenty of
1:37.3	posts of folks going up eight figures this year. Ridiculous action. So what to make of this? Part of me feels like the market is broken, but I'm in my
1:47.0	mid-30s, perhaps I'm just not old enough to understand if there is always an opportunity like this.
1:52.0	I'm very aware of that just like gambling you can
1:55.5	win big when you're in it for a small amount and then lose big when you decide to go all in.
2:02.0	That's not my intention. but I can't help but pay attention to these
2:05.9	gains and consider taking a percentage of my net worth and playing along. Or maybe the market
2:11.6	is broken for a few months or years and I need to take advantage of this opportunity.
2:16.1	For those who are old enough to live through the dot-com bubble, was it like this?
	...

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