There are few financial debates more polarizing than the Meme Stock condition that has captivated markets for almost two years. A case study which three years ago was near impossible to conceive has taken center stage in the economic eye of the world. How did we get here? Like all things there were many factors that have led us down this path.
To start, typical meme stocks like GME, AMC, Bed Bath and Beyond have been on the decline for nearly a decade. As retail sales moved from brick and mortar to online these companies were deeply hurt by this economic trend and as a result their stock hurt because of it.
Wall Street, smelling blood in the water, shorted these stocks to near nothing. This is the nature of global markets today; they are the most competitive places on Earth and the weak do not survive long.
COVID was the knife in the heart of these Meme stocks, as life moved online these old brick and mortars were shorted into bankruptcy.
All of this shorting creating a very interesting environment that some would describe as OVER SHORTING. People recognized that these over shorted shares left the funds shorting these stocks extremely over leveraged. By getting people to buy these stocks in volume shorts were forced to buy back shares in order to cover their positions which led to the short squeezes that were seen throughout 2020-2022.
Today, these Meme stocks have held their incredible evaluations and has been a life line to these once bankrupt companies.
The person who orchestrated this is Ryan Cohen who is the founder of Chewy.com and a chairman for GME. He understood before most that Wall Street was over leveraging itself with these short positions. But the real challenge was creating a narrative to convince people that GME had the chance to turn into a lottery and a weapon.
Cohen’s ability to leverage social media such as Twitter and Reddit to convey a conspiracy to the average person, at the right time has been historic. This was no easy thing to accomplish but each and every day it seems that the GME Chairmen is playing his cards just right in order to manipulate the common stock of GME into a revenue stream.
Cohen has been able to create a situation where he has millions of people convinced that one of the largest problems in the world is Wall Street and he is selling the only solution in town, GME stock. The telltale sign that his strategy is working is that it is so polarizing. There are two camps that have broken out into a pro and anti-meme stonk forces.
The traditionalists believe that Meme stocks such as GME are incredibly overvalued speculation being done by retail investors that are trying to stick it to Wall Street just because. These folks tend to make up the “main stream” view held by many that work in the financial sector from traditional education sources (universities).
The apes see Wall Street as a direct threat to the socioeconomic freedom of the average everyday person. They seem to believe that the Fed and Wall Street are in bed together and illegally manipulate markets to steal from the world to enrich itself. Apes believe that GME is being used as a weapon to attack this threat and will be leveraged into being the ultimate downfall of the existing financial establishment.
This fight creates a lot of energy about the trade and this energy creates liquidity, one of the most important financial factors when trying to make a lot of money. This liquidity has created an environment where everyone playing the game thinks they have a chance at riches whether they are long or short.
Hopieum is a hell of a drug, and GME is tapping into this natural energy found in many people to resist forces that we think to be in control.
This marketing strategy by Cohen is GENIUS and will be studied by students of the market for as long as markets exist.
The true brilliance here is that Cohen’s theory doesn’t even need to be right it just needs to be convincing. And in this highly paranoid social environment his narrative is convincing millions of people to buy GME stock.
As a wise man once said, “The only way to get money is to convince people to give it to you.”
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