Speaker 1: Stock markets frothy at the moment. You know the markets are overheated when meme stocks are considered an actual financial instrument. These are publicly traded companies whose share prices move up and down, not because of their financial performance, but because of the relative popularity of mindless shit trending on the internet.
Speaker 2: Have you ever had a Krispy Kreme?
Speaker 1: Right. Reddit message boards lit up last week with zingers about Krispy Kreme donuts. and because of that sudden pop culture interest. - Have you ever had a Krispy Kreme? - Have you ever had a Krispy Kreme?
Speaker 2: Have you ever gone to Krispy Kreme?
Speaker 3: It's kind of a silly question, isn't it?
Speaker 1: Doom Scrollers started buying shares in the company, which makes them. Lots of Doom Scrollers. Enough people to send the share price of Krispy Kreme Donuts, Inc. up 39% in just a few hours. It's an important phenomenon to understand because history shows that when people start betting on for completely irrational reasons. the share market music could be about to It won't be enough cheers for How common is meme trading? Quite, at least since COVID when we had a lot of time on our Last week it wasn't just crispy Online real estate agency Opendoor which gives lowball cash offers to home and then aims to flip their houses for a was up 43% in way of selling. GoPro Spike 73 No fundamental reason for these share prices to have moved up or down. No trading updates, no revised profit no economic stats out that supported their business cases. - Okay, so who's creating those? Well, it's not like someone woke up one morning and randomly decided to make a funny thing to brighten It's actually a highly coordinated plan to boost a company's stock price.
Speaker 3: Listen, blue horseshoe Blue Star.
Speaker 1: Got it? It's not just any stock that's memeable though. It can't be some obscure industrial conglomerate that nobody's heard of. It's got to be a retail stock with name Sidney Stweeney has been And it's best if the company being targeted is on the nose with it. Investors, you've heard about how people can short stocks. - Short. - If you short a stock, you're betting that the share price
Speaker 2: down. There's some shady shit
Speaker 1: going down. You borrow a share from someone at say a dollar on the promise you will return it to them plus a small percentage lending fee after a time. You sell the share on the open market for a dollar and when it drops to buy it back, returning it to the lender and pocketing - I said difference. - Okay, what if the price goes up and not down? - If you've sold the borrowed share for $1, and the price after a few days isn't 90 cents, then you are in trouble and have to make a decision. You signed a contract to return the shares, at some point, but if you fork out $1.10, you're out of pocket by 10 cents, plus the lenders - So you're white? the market tanks. I get it. feel you judging me. But if the ass doesn't fall out of it, instead it goes to a buck 20, you're in real trouble and you might need to cut your losses and buy at that price. lose 20 cents but that's better than buying at $1.50 and lose Here's where short trading really risky. If short sellers suddenly they got it wrong and the price is going to keep going up, not down, they'll all start buying shares to limit their losses. It's called closing out their positions. the shares goes up. And when demand goes up, the price goes up, which makes short sellers freak out even more - Yeah! - So even more of them bite the bullet and start Everything! It's called a short squeeze and that's the ultimate aim meme traders. Pick a publicly facing retail stock that's heavily shorted, lots of people out there betting the price will fall. Create a gimmicky internet thing that stokes investor interest in the company so the share price starts rising and triggers a short squeeze value rocket. You know what you can't lose if you don't play. Most of us, normal people like you or me, aren't directly affected by meme trading We should all be aware of it because when people are using their funny bones for stock analysis, when something's about to go.