Mediocre Meme Stocks Are Back

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Transcript:

[00:00:04] Doug McIntyre: Lee, I was watching Kohl’s, which is a mediocre, mid-level retailer trade. Yesterday, 208 million shares.

[00:00:16] Lee Jackson: It’s Is that a normal trading day?

[00:00:18] Doug McIntyre: Normal trading day is 12 million. Ah, 200 million is what Tesla trades in a day. And Tesla is the most widely traded stock in the United States.

[00:00:29] Lee Jackson: Right.

[00:00:30] Doug McIntyre: But the problem here is, is that it? Yeah. The day before it was like a $10 stock. I dunno. It goes up over a hundred percent and within a few minutes it drops. Down to 14. So we have advice for people, and, and Lee’s gonna talk in a second here about how this happened before. Yeah, don’t do it.

[00:00:53] Doug McIntyre: Don’t be tempted to do it. You see it go up, you hear it about it in a chat room on Reddit. Some guy in Reddit knows things about Kohl’s that you don’t know. No, he doesn’t. It’s a mediocre retailer. There’s nothing to say. Even if somebody buys it out, even if you knew somebody who was gonna buy Kohl’s is not gonna go for a hundred percent premium. It’s not, no. It is a great way as a retailer investor, to get burned terribly. When the volume on this stuff starts to jump and the stocks start to move up, you get on your Robinhood app and you hope that you’ll catch it and that it’ll go up another a hundred percent. And just as you get on it drops like a rock.

[00:01:33] Doug McIntyre: So, yep. Yeah, we’ve seen this picture before, haven’t we?

[00:01:36] Lee Jackson: Yeah, we did. I mean, during the height of the COVID Horror, we had a slew of these meme stocks and  it got kicked off by GameStop, which I, I think at one point when they, when the, when the Reddit guys or the Wall Street Leaks guys got a hold of it, I think a hundred percent of the GameStop float was short.

[00:02:03] Lee Jackson: Like there was more, I think there was more shares short that actually existed because brokerage firms, they’ll do anything, oh, we’ll put together a little synthetic trade for you. And no, we don’t have ’em, but don’t worry. And it blew up so high because people started following these, these meme stock guys and, and for our viewers.

[00:02:24] Lee Jackson: What happens is, and we’ll use Kohl’s as an example, 50% of the Kohls float, whatever that float is, was sold short, 50%, which is huge. I mean, most companies have two, 3% short. You’ve got it covered. Yeah, and if it’s, let’s say you’re short, and Kohl’s got hammered because A, they’ve had dreadful numbers.

[00:02:43] Lee Jackson: B, they did do a deal with Amazon that was so-so, and C, they used to have a very lofty dividend that used to kinda keep some, some air under, under the stock. No, they cut the dividend, which is what something we wrote about numerous times over the last couple of years that it was likely they would. And then it just got hammered and then, and then of course the shorts say, we’re gonna dog pile on it.

[00:03:06] Lee Jackson: And they drove it down. But then when somebody gets going and starts buying it. you shorts have to cover, and there was mutual funds in 2021 that literally went out of business because of the GameStop blow up. ’cause that was just huge because you, you can have 115% of your shares short. Where’s the number one?

[00:03:25] Lee Jackson: There’s 15% that don’t exist. And then there’s the other a hundred percent. So, it, it’s a fun game to play if that’s your, if that’s your forte, but for your, for our average viewer and reader, hey, there’s plenty of stocks that are $10, like, like, I don’t know what Kohl’s is trading at today, but there’s plenty of stocks in that 10 to $12 range and we cover ’em all the time that are solid buy.

[00:03:48] Lee Jackson: You know that and many that pay big dividends. So, fooling around with this, if it’s just mad money or monopoly money, okay, take a swing, but don’t put any serious money on this ’cause you can get burned big time.

[00:04:00] Doug McIntyre: You don’t wanna lose half your portfolio value in 20 minutes. And that’s what, that’s what you can risk here.

[00:04:06] Doug McIntyre: These people who get on chat boards, social media, they think this is what’s going to create their retirement. And it, it does not. It means they’ll have to work another 10 years.

[00:04:19] Lee Jackson: and, and in addition, a lot of people that do this, they do it on margin, and that’s the way you can lose half your portfolio is, let’s say you go in and buy, I don’t know, 20,000 shares or whatever, and you know your margin, to the hilt.

[00:04:34] Lee Jackson: what if it gets blown up? what if the, the stock that’s gone up 50% or a hundred percent comes down a hundred percent? oh. Then you’re the one getting the margin call.

[00:04:43] Doug McIntyre: Yeah. Who gets that? Who gets that call?

[00:04:46] Lee Jackson: Yeah, you get it,

[00:04:47] Doug McIntyre: You get the call.