When Stupidity Strikes the Market Again

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Well, it has happened again as the meme stock surged back on this unsuspecting Monday. With the addition of the person with the unique Twitter username of Roaring Kitty, we have seen a resurgence of the meme stocks. This person behind this Twitter feed managed to send the markets crazy for at least a day with a couple of seemingly harmless memes with massive underlying meaning from the previous 2020 meme stock craze beginnings. But today we saw what many meme stockers think was a massive vengeance as GameStop (ticker: gme) and others like AMC (ticker: amc) jumped over 70% in one day on May 13, 2024. Combined with the fact that the current after-hours suggest there could be more excitement come Tuesday morning.

What does this mean and how long?

To answer this question is actually really hard because like John Wick meme stocks always tend to strike right when you least suspect. But what one can say is relate from last time and take a look at these so-called meme stocks to see what rocket fuel sends them soaring to the so-called “moon”. And a large part of the rocket fuel that sends it flying with the many internet folks who push it forward is their underlying percentage of float shorted. We can see both GameStop and AMC with percentages of around 20% of float shorted. To add some reference to a stable stock of the mighty Apple, which only has less than a percent of float shorted. And while this is a case-by-case basis for each stock the short interest is significant enough combined with the meme mob gathering behind the so-called Roaring Kitty to push forward these stocks. But generally, what this means is that we will see something that mirrors the meme stock run from a couple of years ago, but probably with less steam as the fuse does seem smaller. This is because as compared to the percentage of float shorted for GamStop compared to 2020 where 140% of its public float sold short. So, the percentage short difference with a more stable new CEO at the helm combined with the fact that the sequel is never the same as the original is why we probably see this one die off quicker this time around.

But How will One Move Forward?

So, as we see these events unfold again and the madness of the meme market to try and take the world by swarm again it is unlikely we will see this last for a significant period of time. And like last time shown this meme rallies do lead to substantial changes in the individual stocks it affects and the market. As we saw GameStop was able to continue to try and reshape its business after their first blow-up back in 2020. But these rallies also showed that over time they fall, but now to a new reality until the meme swarm strikes again.