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Tesla, GameStop and the power of “ meme stocks ”

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Tesla, GameStop and the power of “ meme stocks ”

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“Who controls memes, controls the universe ”- Elon Musk (June 26, 2020)

Centuries ago, when I was interviewing for a job at another financial publication, I could tell exactly when it all went off the rails. Everything was going well – until my last interview where an aspiring copywriter showed up and asked me a question I knew would be decisive: “What do you think of Tesla?”

The hard-nosed guy in front of me wanted to hear, clearly, that I hadn’t bought Tesla’s hocus-pocus. The electric automaker was burning cash like a wildfire on the West Coast. You’re here was extremely unprofitable, riddled with mountains of debt and constantly lacking expectations. The entire auto industry was right for the company, competition was intensifying from tech giants like Apple, Google, and others, and pretty much every short seller was betting on his demise. Oh, and the company had a loose cannon liability in the driver’s seat at Elon Musk. Tesla’s market valuation was clearly out of step with reality.

I said all that. And then I surrendered.

Even knowing all of this, I say, seemingly favoring candor over employment, I wouldn’t bet against Tesla. Musk has built a cult-type fan base that will follow him to the underworld or the void of space or wherever he wants to go and return. If you are ‘short’ Tesla then you are underestimating Musk’s influence and failing to grasp the underlying dynamics of the market.

I could see micro-stress lines forming in the corners of the editor’s eyes. I could feel his smile fade. My response was not what he hoped to hear. The answer did not freeze with his decades of experience as a savvy observer of market turmoil. He was clearly a student of value investing, Warren Buffett’s rational approach to valuing stocks. Another dumb Musk fanboy I’m sure he thought.

Tesla shares jumped well over 1000% since I missed this opportunity. Likewise, Bitcoin rebounded in a lunar explosion. An army of editors offers a new GameStop mode until it became America’s most traded stock, pushing it to over 1,600% year-to-date. A large number of other once-declining stocks and also hit the jackpot, if temporarily, including AMC, Bed bath and beyondand Roomba-maker I robot.

All of these companies – and, yes, Bitcoin too – have something in common. Their evaluation successes, even short or long term, are “Same” culture, the phenomenon of people who come together, show compassion and make jokes on social media. Actions that can generate a lot of excitement online, whether they inspire loyalty or just lulz, go, as a rule, be rashes.

Bubbles aren’t something new, of course. (See: Bulbs, Tulip.) But millions of discussion boards, like Reddit’s “wallstreetbets” forum, and brokerage apps accessible by phone with 24/7 toll-free exchanges, like Robinhood, are. Even though the highs we are seeing today are just a temporary episode of market madness heading for a white-fist correction – which, yes, is likely – I consider something fundamental in the world. , about how the speed and scale of the Internet influence the analytical calculation of stocks, has changed.

Investment is growing more democratized day by day, and the unwashed masses outside of Wall Street are wielding more power accordingly. “Becoming an investor is the new American dream, just like homeownership was before,” said Vlad Tenev, CEO of Robinhood linked to an IPO written. In this new era, the intangible factors of assets – those that can inspire religious devotion (like Tesla) or Dionysian decadence, to the flash mob (GameStop) – are gaining momentum. Memes matter.

The other day i tweeted, half-jokingly, “If you don’t calculate the price / memes of a stock, your fundamental analysis is lacking.” I maintain this now, just like I did in my failed job interview.

Robert hackett

@rhhackett

robert.hackett@fortune.com



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