Gordon: Surprising to see the return of the meme stock craze
TLDRIn a discussion on the resurgence of the meme stock craze, Todd Gordon suggests that the current market dynamics are different from the 2020 frenzy. He notes that high inflation and Nasdaq's new highs are not necessarily indicative of a return to the previous situation. Gordon points out that short interest has significantly decreased, reducing the likelihood of a short-covering rally. He also recalls his experience on CNBC when Ryan Cohen joined GameStop and cautions against attempting to short stocks like GameStop, AMC, or BlackBerry through options trading. Instead, he advises a more disciplined approach to investing, highlighting the potential in companies experiencing growth due to advancements in AI technology and other sectors.
Takeaways
- 📈 The return of the meme stock craze is surprising and may not be a true return but a different market dynamic.
- 🌐 The market is currently quiet, possibly due to a transitional period and reduced trading activity from certain demographics.
- 💡 High inflation and the NASDAQ reaching new highs are not necessarily indicators of a meme stock resurgence.
- 📚 Lessons from the 2020-2021 meme stock frenzy include the impact of pandemic stimulus checks and the surge in retail trading and options trading.
- 🔥 The original meme stock craze was fueled by a high short interest rate, which is not as prevalent in the current market.
- 💼 The current CEO of GameStop, Ryan Cohen, took a position at Bed Bath & Beyond, which was met with cautionary advice from the speaker.
- 🚫 The speaker was negatively impacted by a Reddit board interaction and advises caution against engaging in similar situations.
- 📉 The company in question is expected to perform worse than the previous year, highlighting a different economic environment.
- 💼 People are working and the market is in a transition period, which may affect trading behaviors and opportunities.
- 🚫 The speaker suggests caution against shorting the stock via options, as the trade was not successful in the past.
- ⚖️ There are many opportunities for disciplined investment in companies experiencing growth, particularly in the A.I. technology sector.
- 💰 The speaker advises against buying cheap stocks based on message board hype, recommending a more disciplined approach to capital deployment.
Q & A
What is the current state of the market according to the speaker?
-The speaker describes the market as being a bit quiet and going through a transitional period.
What does the speaker think about the return of the meme stock craze?
-The speaker believes it's not a return of the meme stock craze but a different market dynamic with a different economy.
What was the situation with short interest in the stock during the 2020 meme stock frenzy?
-In 2020, there was more open short interest than float on the stock, with short interest being 250 million and 275% of the float.
What is the current short interest in the stock?
-The current short interest is $65 million, with 35% of that being float.
Why does the speaker believe the conditions are different this time around?
-The speaker cites the reduced short interest, the change in the economy, and the fact that people are working as reasons why the conditions are different.
What was the speaker's experience with the CNBC show and Reddit boards?
-The speaker mentioned being on the CNBC show when the current CEO of GameStop took a position at Bed Bath & Beyond and being skewered on the Reddit boards, which he still thinks about years later.
What was the company's performance compared to expectations last year?
-The company was supposed to make 12 cents last year but only made 6 cents.
What is the speaker's caution regarding shorting the stock via options?
-The speaker cautions against it, stating that there are too many opportunities to get involved in this and that the trade wasn't taken the last time he tried.
What advice does the speaker have for people wanting to trade stocks or options in names like GameStop, AMC, or BlackBerry?
-The speaker advises against buying cheap stocks that a message board is going after, suggesting a more disciplined approach to making money and effectively deploying capital.
What does the speaker suggest for younger investors or the CNBC viewership?
-The speaker encourages younger investors and the CNBC viewership to look into companies going through an amazing generative A.I. technology boom and massive companies beating EPS by 50%.
Why does the speaker believe there is a more disciplined way to make money?
-The speaker believes in a more disciplined approach because of the potential for significant returns in the booming A.I. technology sector and the importance of effectively deploying capital.
Outlines
📈 Market Dynamics and Meme Stock Craze Return
The conversation begins with a discussion on the current state of the market and the surprise of a potential return to the meme stock craze. The guest, Todd, suggests that the market is quiet and in a transitional period, hinting at a different market dynamic rather than a true return of the meme stock phenomenon. The mention of Roaring Kitty posting pictures and the context of high inflation and the NASDAQ reaching new highs set the backdrop for the discussion on the lessons learned from the 2020-2021 meme stock frenzy, which was fueled by pandemic stimulus checks and a surge in retail trading and options trading.
📉 Differences in Today's Market and Short Interest
The dialogue shifts to the differences between the current market and the one during the 2020 meme stock craze. Todd explains that the logistics of stock trading have changed, with short interest being significantly lower compared to the float. He provides specific numbers to illustrate the point, stating that in 2020 there was 250 million in short interest and it was 275% of the float, whereas today it's $65 million with 35% of that being the float. This indicates that the conditions for a short-covering rally are not as strong as before. The conversation also touches on Todd's past experiences on CNBC and his interactions with Reddit boards, emphasizing the importance of caution and discipline in trading.
💡 Advice for Young Investors and Opportunities in A.I. Technology
Todd offers advice to younger investors and the CNBC audience, warning against the allure of quick riches through volatile stocks like GameStop, AMC, or BlackBerry, which are often targeted by message boards. Instead, he encourages a more disciplined approach to investing, highlighting the current boom in generative A.I. technology. He points out that many companies are experiencing significant growth and beating earnings per share (EPS) estimates by large margins, suggesting that there are better opportunities for capital deployment in these areas.
Mindmap
Keywords
💡Meme Stock
💡Short Interest
💡Robinhood
💡Options Trading
💡Short Cover Rally
💡Inflation
💡NASDAQ
💡Reddit Boards
💡GameStop
💡AMC
💡BlackBerry
💡A.I. Technology Boom
Highlights
Surprise at the return of the meme stock craze, with the market being quiet and in a transitional period.
The current market dynamics and economy are different from the previous meme stock frenzy.
Roaring Kitty shares pictures that highlight high inflation and the Nasdaq reaching new highs.
Lessons from the 2020 and 2021 meme stock frenzy include the impact of the pandemic and stimulus checks.
People were opening Robinhood accounts and engaging in options trading, which fueled the original meme stock craze.
The logistics of stock trading have changed since 2020, with a significant reduction in short interest compared to the float.
The short interest in the stock is now $65 million, with 35% of that being the float.
The potential for a short-cover rally is not as strong as it was in 2020 due to the reduced short interest.
The current CEO of GameStop, Ryan Cohen, took a position at Bed, Bath & Beyond and became aggressive with it.
Todd was warned about the situation and shared his experience of being negatively impacted on Reddit boards.
The company in question is expected to make 12 cents last year but only made 6 cents.
The current economy has people working and is in a transition period, unlike the previous meme stock environment.
Todd suggests caution and mentions considering shorting the stock via options, although he was unable to do so previously.
There are many opportunities available, and Todd advises against getting involved in the meme stock craze.
Todd advises against buying cheap stocks that message boards are targeting and encourages a more disciplined investment approach.
He highlights the generative A.I. technology boom and the significant earnings surprises in the market as better investment opportunities.