Meme Stocks
What’s a “meme stock” and what does it mean for your portfolio?
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Full Transcript below:
00;00;00;00 - 00;00;28;18
Unknown
Welcome back to 30 Minute Money. The podcast delivers action oriented smart money ideas and bite sized pieces. I'm Scott Fitzgerald alongside Steve, Wershing the ROC Vox Studios outside of Rochester, New York. Nice cool air conditioning. Rock Box Studios. It's a rare thing to, to worry about heat here, but it does happen for 3 or 4 days.
00;00;28;20 - 00;00;41;11
Unknown
Well, I was just I was yeah, we have a little issue in our office that the building's air conditioning is not working like it might. And so it was a pleasure to come down here where it's good and cool. It's always nice to have you here to talk about these interesting things. And this one really caught my eye.
00;00;41;17 - 00;01;02;16
Unknown
Meme stock, meme stocks. I didn't know that that was a thing of going to be stock going to be meme girls today. So. So according to my kids, memes can be anything I thought it was just, a graphic with a, you know, a corny saying on it or somebody doing something stupid. Yeah, but now you they'll say, oh, daddy, that's a meme.
00;01;02;16 - 00;01;23;19
Unknown
That whole thing, like this guy walking down the street is a meme and I don't know. Okay. Yeah, whatever. Now. And investing in a certain stock isn't this way. Well, here's the thing is, it builds on the same. It builds on the same platform, I guess. You know, it's you know, it's I think that they're called that because these are things that come out of social media and chat rooms and discussion groups and that kind of stuff.
00;01;23;20 - 00;01;44;22
Unknown
Yeah. And that's why, you know, I think that's why they're, they're referred to that way. And so, this is this is a distinctly new kind of trend where you've always had people who were, you know, who were amateur investors and interested in things, but now because of social media, they had some of them have tremendous reach.
00;01;44;29 - 00;02;02;00
Unknown
Yeah. And so all of a sudden you can get you can get, you know, a conversation going about some particular stock or some particular security. And it catches on like wildfire that game stock and that game and GameStop. GameStop is the GameStop and AMC are two of the big ones. And that's what we want to talk about today.
00;02;02;02 - 00;02;22;21
Unknown
And so there are those people out there who have become, you know, influencers, right? That's a whole nother new word, influencers on social media. And they've got big, big followings, big audiences, and they're, you know, names like roaring Kitty is the most famous one. I you is that who I'm going to take my financial advice? Well, that's because that is the question.
00;02;22;21 - 00;02;44;00
Unknown
You know what do you do you want to use I love it. Do you want your investment guru to be roaring Kitty? But they also have the Reddit raiders and and, you know, there are chat rooms that are that have been going on for a long time. There's one famous one called the Stocktwits Chat Chatroom, where they're always trading, you know, ideas back and forth.
00;02;44;05 - 00;03;08;02
Unknown
But now that they've got such big followings and they're a couple, you know, there are people like roaring Kitty who, you know, are, you know, have and, you know, they have such big reach that they start saying, oh, well, we actually I think GameStop was an interesting and interesting one because I think the real interesting GameStop, was actually a retaliatory thing because they didn't think the company was being treated well.
00;03;08;05 - 00;03;35;01
Unknown
And so they decided, well, we're going to we're going to show these short sellers something. And they went out and just did it up like crazy and crushed those. You know, crushed the people who are selling it short. Anyway. So the reason I bring it up is because you see these things now in the headlines, you see these things in the news articles, and it's really tempting, you know, because they can take one of these stocks and push them up 50, 100, 500% in a short period of time.
00;03;35;01 - 00;04;00;19
Unknown
And it's really tempting to say, I just want a piece of that action. I just want a little bit of right, right, right. I want to participate in that. And, and I appreciate it. It can be really hard to resist the temptation of doing that kind of thing, because you see these stories over and over and over again that they they just pick a company and they promote, you know, they they talk it up and everybody gets excited about it and it shoots to the moon.
00;04;00;21 - 00;04;31;06
Unknown
But then what? Well, that's the question. Yeah. Because most of the time they fall right back down again. You know, the, the, the problem is that, the price of a stock, for the most part, is a reflection of the whole investing community's opinion about the future of that company. And that's one of the reasons it's it's hard or impossible to outsmart the market is because you've got millions of people voting with their wallets every day on what they think.
00;04;31;08 - 00;04;54;25
Unknown
And if you get this distortion in the marketplace, if you get somebody out there who's just got tremendous reach and talks it up and gets a whole lot of people to buy it, that affects the price. That's not based on fundamentals, that's, you know, and the market, the market is always irrational in the short term. In the long term the market is rational and the and the market will reflect the prospects for those companies and the economy and those kinds of things.
00;04;54;28 - 00;05;30;21
Unknown
But in the short term, it the market almost always overreacts to everything. And, and it's really affected by irrational pressures. And so if you want to be a long term investor, you can outlast all those little irrational blips that happen along the way. But if you're going to if you're going to take a piece of your wealth and invest it according to these kinds of things, then you're making yourself, subject to all of those irrational things, and you had better be able to guess which way it's going to go before it turns rational again or or turns irrational in the other direction.
00;05;30;24 - 00;05;53;12
Unknown
Yeah. There's there's a whole, you know, group of people, like you said, these influencers that have all this reach that a lot of them, their whole impetus of doing things is just to make waves, like the whole reason why they want to, like, they think it's funny. Let's let's pick this, you know, XYZ Corp. that sells widgets and let's make them the biggest thing ever.
00;05;53;13 - 00;06;14;15
Unknown
Well, that's that was GameStop was games. And then it's like woo they're hoo. They ruined lives at the same time. And they're like, oh sorry. Yeah. Well and and we can't really blame them for doing that because it's not those people who are ruining lives. It's the people who don't recognize that you've got to, you know, it's going to be an irrational thing.
00;06;14;18 - 00;06;30;17
Unknown
And it's just like the lottery. There's nothing wrong with with playing the lottery. But you, you know, you need to do it with money that you anticipate losing. That's it. And if you do it for entertainment value and you put a few bucks into things for the entertainment value, there's not nothing wrong with that. Right? But it's not investing.
00;06;30;22 - 00;06;56;05
Unknown
Right. And in this case, you know, we talk about the difference between trading and investing. But this isn't even either of those. You know, there's investing, which is a which is a well thought out approach that's based on solid principles and done over the long term, versus trading, which is buying and selling securities on a shorter term based on much shorter term trends or shorter term market moves.
00;06;56;07 - 00;07;15;03
Unknown
But then this is just speculation. This is just, you know, a Wheel of Fortune, right? We're just going to put our chips on the prospecting. Right. It's a it's like panning for gold. Exactly, exactly. It's, it's it's like playing roulette. You're going you're going to put the, put the chips on the table and you just hope the ball falls in the, in the right number.
00;07;15;06 - 00;07;33;22
Unknown
And so, you know, it recalls, you know, there all these, you know, expressions that are popular, you know, that are time tested and investing. One of the ones that that applies here is that bulls make money, pigs get slaughtered. And so you can be up on the market, you can be optimistic about the market, and you can make money.
00;07;33;22 - 00;07;56;20
Unknown
But if you try to be too greedy about it, you're going to get killed. I see, so it can be really tempting. It can be really attractive. You it's it can be hard to resist that siren song of things like GameStop and AMC, but avoid it, and you will be much better off financially. Why did they pick AMC?
00;07;56;20 - 00;08;18;01
Unknown
They said the movie company, the theaters. Yeah, any I don't remember. And it's just so it's just so weird. It's like AMC of all the yeah, the movie companies, you know, the theaters or some. It's whatever reason they decided to talk it up, but that's what they did was they talk that up and they pumped it up. And then the price moved and everybody noticed the price move, and then it snowballed from there.
00;08;18;03 - 00;08;36;09
Unknown
But then, like you said, it always corrects. And so all those people who are doing that need to know that it's going to go back and they got to get right out of it, which means it's all going to come crashing down anyway. They you have to time those things exactly right. And that's it's extreme difficult or impossible to time it.
00;08;36;09 - 00;08;53;15
Unknown
Exactly right. And so you know again if you want to take a couple hundred bucks or a couple thousand or whatever, whatever is not going to whatever whatever you could, whatever you could spend on entertainment. Yeah. And do that with it. There's nothing wrong with it. But but don't make it, you know, don't do it with any of your serious money.
00;08;53;18 - 00;09;07;07
Unknown
I don't know, taking a block of money and setting on fire and watching it burn. That would be kind of entertaining, but I don't think I want to do it well. Well, you know.
00;09;07;10 - 00;09;42;01
Unknown
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00;10;32;29 - 00;11;09;28
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