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Stocks of memes, like The Cicadas and Michael Myers, seem impervious to death.
Take the health of the clover (CLOV). The Franklin, Tennessee-based healthcare tech company started out in the midst of last year’s SPAC (Special Purchase Acquisition Company) boom, powered by famed venture capitalist Chamath Palihapitiya and boosted by enthusiastic individual investors on Reddit’s r / WallStreetBets discussion group.
Stock climbed to nearly $ 18 a share from roughly the top of the GameStop memes-inspired windfall (GME) before tumbling like a rock after research firm Hindenburg released an acidic report in February that said Clover Heath had a “broken business”. Clover eventually announced it was under investigation by the Securities and Exchange Commission (SEC), which dropped the stock to below $ 7 a share in mid-May with no signs of a rapid rebound. .
Until the great horde of populist investors retaliated.
Even actions are back
Clover Health gained nearly 33% on June 7 and is up nearly 60% last week, as of this writing. Meanwhile, AMC’s (AMC) stocks are also turning into gangbusters, increasing by over 400% over the past month, ultimately leading the struggling theater chain in real life but not in virtual spaces. to sell new shares. to collect $ 800 million in cash.
Other memes stocks, such as Blackberry (BB) and OG GameStop, have seen their prices rise in recent days, apparently only due to interest from individual investors keen to make Stonks Great Again.
And just like last time with GameStop, experienced hands on Wall Street are warning investors against fervor.
“There is no fundamental reason to buy shares of AMC Entertainment,” said David Trainer, managing director of investment research firm New Constructs. “We think [its] The share is worth $ 0 per share, given its low earnings, dilution from recent stock offerings, and the mountain of debt. “
It seems that this one-on-one (enthusiastic speculators with a few extra bucks to spare by buying random companies that were more successful a decade ago only to receive scolding from more experienced fund managers frustrated with the irrationality of it all) will continue through 2021.
Prepare for the strange
In a way, the protracted battles against memes make sense given how oddly the rest of the economy is doing.
It was believed that if President Joe Biden could put thousands of dollars in the hands of average Americans with his massive relief bill in March, and if the vaccines proved to be effective and people actually took them, and if the governors States lifted social distancing restrictions, the economy would skyrocket.
Instead, the economy has seen back-to-back reports of terrible jobs in meh, pulling fewer people into the workforce in May than in April. Consumers, although overflowing with cash, suddenly worry about a spike in inflation limiting their purchasing power. And while it’s good (for homeowners) for home prices to skyrocket, it’s not particularly useful if you can’t find an affordable home to move into once you’ve sold.
The Federal Reserve has said it is ready to accept inflation rates above its 2% target as it attempts to use a easy money policy to help millions of Americans get back to work. But low interest rates, even as many sectors of the economy are scorching, have helped spur interest in riskier trades, like memes stocks.
What You Should Do About Meme Actions
Unless you dig into the threads of r / WallStreetBets in search of the new novelty your jam is, you should try to sort out all of this shenanigans.
The economy must overcome these growing pains as it fully reopens. Fed policy makers and lawmakers in Hill and state capitals need to experiment with the right incentives to get America back to work. And no one, at least in recent memory, has done things like this before, so it can take a while to get it right.
Therefore, it is not very surprising that bizarre events occur more frequently. The key is to stick to your long-term investment plan, which typically includes regular investments in slow but stable index funds, so that you can enjoy your life when things are more normal. And if you have to invest your dollars in the latest Reddit superstock, make sure it’s money you can afford to lose.