Why Did Reddit Trigger a GameStop Stock Surge?

[Astronuc]

At the end of today:

Symbol	Last Price, $	Change, $	% Change
GME GameStop Corp.	220.39	-82.17	-27.16%
CLNE Clean Energy Fuels Corp.	10.99	-2.03	-15.59%
CLOV Clover Health Investments, Corp.	14.34	-2.58	-15.25%
CELH Celsius Holdings, Inc.	61.75	-10.98	-15.10%
AMC AMC Entertainment Holdings, Inc.	42.81	-6.53	-13.23%

 

[phinds]

Yesterday GME was 320, today 220. The see-saw continues. I skimmed reddit today and saw at least one guy thinking that CLOV was going to 25 today.

 

[kyphysics]

A number of states have ended enhanced unemployment insurance (that federally assisted $300/week on top of regular state unemployment). . . . . eventually, all states (notwithstanding a new stimulus renewal, which I doubt, given nothing in the talks) will end that on September 2021.

How much longer can the casual, stimulus money-supported retail meme stock traders continue to buy (whether call options or actual shares) these stocks going forward? I know a lot of institutional investors have attributed to the meme stock mania too (if not the bulk), but a lot of the stimulus that's let people stay home and trade stocks in their PJs has started to end.

Will be interesting to see what happens later in the year.

 

[Vanadium 50]

casual, stimulus money-supported retail meme stock traders

What evidence do you have that this is "stimulus-money supported"?

 

[kyphysics]

Both anecdotal stories + surveys...e.g.,
https://www.cnbc.com/2021/03/08/how-the-young-plan-to-spend-stimulus-checks-deutsche-bank.html

• An online survey of 430 investors who use online broker platforms found that half of respondents between 25 and 34 years old plan to spend 50% of their stimulus payments on stocks.
• Meanwhile, 18- to 24-year-old retail investors involved in the survey planned to use 40% of any stimulus checks on stocks.
• And 35- to 54-year-old retail investors surveyed planned to use 37% of their checks on stock market investment.

The Tik Tok Investors' Twitter page became a sort of hit last year in chronicling crazy investor advice found on Tik Tok in 2020:
https://twitter.com/TikTokInvestors
Sampling of what they're saying:

 

[kyphysics]

Of course, there's this too:

 

[kyphysics]

Sort of tangentially related.

 

[phinds]

These folks are nuts. SOME of them do make money but most lose and a lot of them are going to lose big (or already have).

 

[Vanadium 50]

The plural of anecdote is not data. Neither is the plural of tweet.

 

[kyphysics]

*self-deleted*

 

[Vanadium 50]

If you want to challenge what I said in some other thread, have at it. In that thread.

 

[kyphysics]

https://www.nytimes.com/2021/03/21/business/stimulus-check-stock-market.html
This was interesting (dated, though):

Abraham Sanchez knew exactly how he wanted to spend his stimulus check.

Like millions of Americans, he had begun dabbling in the stock market during the pandemic. So, soon after $1,400 from the federal government landed in his bank account last week, Mr. Sanchez, a 28-year-old trumpet player in Sacramento, moved all but $200 of it into his Robinhood online trading account. He then used most of it to buy 80 shares of AMC Entertainment, the struggling movie theater chain. . .

For Victoria Brown, a 25-year-old in Wilmington, Del., with a secure job in government, the $1,400 stimulus check is more of an opportunity than a lifeline. She has already moved the money into her Robinhood account and plans to use some of it to buy the stock of Zomedica, a pet health company she owns 1,000 shares of. Ms. Brown said her approach to the stimulus was: “How can we take this $1,400 or the $1,600 last year and do something to make more money with it?”

In a recent note to clients, market analysts with JPMorgan found that the intensity of retail trading in the stock and options markets “has exhibited correlation with previous rounds of U.S. stimulus checks.”

September sees the end of $300/weekly enhanced UI, PUA and PEUC benefits, student loan payment pauses, etc. Most American Rescue Plan stimulus "payments" will be gone by then, except the Child Tax Credits (which just began in July). HOPEFULLY, no one is taking their child tax credit money and buying stocks with THAT!

 

[kyphysics]

If you want to challenge what I said in some other thread, have at it. In that thread.

Was suspended/banned from that thread, V50. Maybe you can petition to bring me back into the COVID main thread? Or, just PM me and we can chat that way.

 

[phinds]

Not sure what this is referring to...

? It is a very clear comment on the moronic attitude taken by the people YOU posted about. In fact, it seems to me to be an agreement w/ the sentiment behind your having made those posts. Unless you were praising those nut cases.

 

[kyphysics]

? It is a very clear comment on the moronic attitude taken by the people YOU posted about. In fact, it seems to me to be an agreement w/ the sentiment behind your having made those posts. Unless you were praising those nut cases.

I have relatively low IQ, I think, so I'm sorry if I'm not following. I was under the impression V50 was possibly referring to my earlier posts (not the taking on debt to buy stocks one) about Tik Tok investors using their "stimmies" to buy stocks. But, I wasn't sure.

I'm not sure how the common witty social scientific saying of "the plural of anecdote is not data" applied to my tweet repost about people taking on debt to buy stocks, though, and thought generally V50 was suggesting that I was making some kind of an unsupported claim or sorts. But, again, I'm not sure.

To that end, I wanted to clarify that that tweet repost (re; debt) was just some random thing I saw today related to stocks and thought I'd post in this thread rather than start a new one. It wasn't related to any "point" or "argument position" I had re: meme stock trading and gamma and short squeezes ($GME, $AMC, etc.). Sorry if it seemed that way. Was busy and just posted that randomly w/o thinking of how it might be interpreted. Mostly, I just see this thread as a "broad" stock discussion/news thread, so I've posted broadly sometimes.

 

[kyphysics]

Should we have a "general" stock and/or economy thread in addition to this one?

Sometimes, I just "lazily" post stuff on that in here, b/c I don't want to start a separate one(s).

 

[kyphysics]

moronic attitude

What do you say to those who would argue that retail investors taking on debt to buy stocks is no different than hedge funds and other wealthy investors leveraging up in potentially dangerous ways (that often backfire...seems like there are stories every year of some big hedge fund blowing up from stupid highly levered bets)?

If wealthy investors can try to make money this way, why should we criticize retail/individual investors? Not saying I have a position one way or the other, but just posing the question.

 

[phinds]

... no different than hedge funds and other wealthy investors leveraging up in potentially dangerous ways (that often backfire.

They do indeed sometimes backfire but you are talking about folks who generally know what they are doing, and take risks, vs the Reddit crowd most of whom haven't a clue what they are doing, and take risks that they do not understand? Have you READ any of the comments on Reddit? They're nuts.

 

[kyphysics]

They do indeed sometimes backfire but you are talking about folks who generally know what they are doing, and take risks, vs the Reddit crowd most of whom haven't a clue what they are doing, and take risks that they do not understand? Have you READ any of the comments on Reddit? They're nuts.

Yeah, some may not be very knowledgeable and using that borrowed money unwisely.

I do recall legendary investor, Sir John Templeton, having borrowed a lot of money to buys stocks during a major crash (can't remember which war or recession it was) and having come out a huge winner. He had just graduated and didn't have much money to his own name yet, so had to borrow to invest.

Buying some hugely beaten down stocks last March on credit perhaps isn't the worst idea. Although, I feel a lot of investors "got lucky" to a degree as well, as the Fed didn't have to bail out the corporate bond market. Had they not done so, we could have had a financial crisis worse than 2008 and a much lower bottom to markets. I feel we got "lucky" with highly effective COVID vaccines as well that have given us a path to return to some sense of economic normalcy.

Borrowing money to invest at these current crazy valuations is a different story. I can understand doing it last March, but much less so this March/year (if buying at the top of this market).

 

[Astronuc]

Epilogue: Most key Reddit stocks crater from AMC Entertainment's June 2 high

https://www.investors.com/etfs-and-...illion-gone-meme-stock-crash-wipes-out-gains/

Investors piling into 15 select hotly traded stocks discussed online, such as AMC Entertainment (AMC) and GameStop (GME), lost nearly half their remarkable score this year. These 15 stocks soared on chatter on Reddit. But they've dropped $25.6 billion in market value since AMC Entertainment peaked on June 2, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. June 2 is now seen as the day the meme furor peaked.

 

[kyphysics]

GameStop should hatch a new (or add-on) business model: stock trading

I bet their stock would 10x in a month.

They could have a section of their physical stores devoted to educational materials for kids on how to trade stocks.

 

[collinsmark]

(Source: https://www.smbc-comics.com/comic/ags)

 

[BWV]

So true

 

[phinds]

SO true

 

[Vanadium 50]

Robinhood just had the worst IPO ever for a company of its size: down over 8%.

 

[kyphysics]

Cathie Wood bought $45 million stake in Robinhood.

eta: And not saying that's a good idea! Just reporting.

 

[Office_Shredder]

Robinhood just had the worst IPO ever for a company of its size: down over 8%.

Or the best ipo ever for the company.

 

[kyphysics]

During commercial break on NBC, from the Olympics, Robinhood ran an ad.

Three young and professional minorities: African American, Latinx, and Asian American.

They mentioned wanting to build long-term wealth to reach their goals/dreams. Why do I get the feeling these aren't the typical Robinhood investors?

 

[phinds]

During commercial break on NBC, from the Olympics, Robinhood ran an ad.

Three young and professional minorities: African American, Latinx, and Asian American.

They mentioned wanting to build long-term wealth to reach their goals/dreams. Why do I get the feeling these aren't the typical Robinhood investors?

Why would they not be? Stupidity is not limited to us white guys.

 

[kyphysics]

Why would they not be? Stupidity is not limited to us white guys.

It wasn't about race, but rather responsible professionals that I was thinking of.

These looked/sounded like smart, thoughtful, and responsible professional workers (you had to have seen the commercial maybe).

I guess I had in mind the Wallstreetbets posters YOLO'ing their last $200 in their bank account into $AMC or something (be they white, black, brown, or whatever).