Yesterday’s trading frenzy in shares of struggling movie theater operator AMC Entertainment (AMC) made that clear.
It’s one of the stocks, along with video game retailer GameStop (GME), that individual investors have targeted by way of the WallStreetBets group on Reddit.
AMC closed yesterday’s session at an all-time high of $62.55 a share – nearly double Tuesday’s closing price.
Take a look…
Even more incredible… since the start of May, AMC is up 500%.
And yesterday’s move left it up 3,000% for the year as of yesterday’s close. (At writing, it trades at $51.34 – still up more than 2,300% for the year.)
To put that in perspective, bitcoin (BTC) is up 3,000% over the past four years.
Amazon.com (AMZN) is up 3,000% over the last 11 years.
And Berkshire Hathaway (BRK.B), the conglomerate run by super-investor Warren Buffett, is up 3,000% over the past 28 years.
The company lost $4.6 billion last year, mostly due to COVID-19. But in 2019, it was already bleeding money – losing $149 million.
And with more of us choosing to stream movies at home rather than go to a movie theater… its profit outlook isn’t great.
But that hasn’t stopped the Reddit army from piling into AMC stock. And it hasn’t stopped AMC management from courting its attention.
The movie theater chain launched a portal on its website for individual investors who are pumping up its stock. When they sign up for AMC’s loyalty program, they get special offers… including a free tub of popcorn!
The company even delayed its annual shareholders’ meeting to give these folks an opportunity to attend and “make their important voices heard.”
As Dorothy says in The Wizard of Oz, “Toto, I have a feeling we’re not in Kansas anymore.”
That’s something we all have to grapple with as investors.
So today we’ll look at whether the stock market has turned into a casino for the deranged, as our ever-skeptical cofounder Bill Bonner believes…
And we’ll tackle the thorny question of whether these meme stocks deserve a place in your portfolio as moonshot bets.
(As always, you can have your say by writing to feedback@legacyresearch.com.)
The Daily Cut is the e-letter we created for all paid-up Legacy Research subscribers.
Legacy is the publishing alliance behind Bill, Doug Casey, Teeka Tiwari, Dave Forest, Jeff Brown, Nick Giambruno, Jason Bodner, Tom Dyson, and Dan Denning.
Each day, they publish insights about stocks, cryptocurrencies, commodities, bleeding-edge tech, macroeconomics, and trading…
There’s so much material, it takes me and my team a whole morning to sift through it.
Once we do, I send the choicest “cuts” from this research… in easy-to-digest form… straight to your inbox.
And today, I’m shining the spotlight on our cofounder Bill Bonner’s take on the meme-stock spectacle.
As we’ve been covering in these pages, we’re living through an age of unprecedented stimulus.
This next chart is of the size of President Biden’s stimulus proposals, in inflation-adjusted terms, compared with past government interventions.
The amount Biden wants to spend is three times larger than what we saw after the 2008 financial crisis.
And it’s nearly five times larger than the New Deal social programs during the Great Depression in the 1930s.
This is powering the meme-stock phenomenon, says Bill…
Right now, much of the stimmy-check money is going into the Wall Street economy, not the Main Street economy. Robinhood and other online trading platforms opened new accounts at a feverish pace last year.
This is easy-come, easy-go money… Might as well exchange it for gambling chips.
More fun than a casino – where gamblers at least understand the odds, more or less – the stock market has turned into a sort of bingo game for dyslexic lunatics. Neither words nor numbers need to make any sense.
And the stock market isn’t the only place lunatic gamblers are at work.
Dogecoin (DOGE) – pronounced “dohj-coin” – is a meme-inspired cryptocurrency.
In 2013, a pair of software engineers, Billy Markus and Jackson Palmer, created it to poke fun at the wild speculation happening in the crypto market.
Despite that – or maybe because of it – Dogecoin is up 3,945% so far this year.
That’s 789x more than shares in Pfizer (PFE) – a company behind one of the most effective COVID-19 vaccines.
Shares in the pharmaceutical giant are up just 5% this year.
He’s Buffett’s right-hand man at Berkshire Hathaway.
But Bill reckons calling the market a casino gives gamblers a bad name…
When you buy a meme stock or cryptocurrency without doing any research, you are neither investing nor speculating. You’re pretending to invest or speculate without any idea what you’re doing.
You’re simply hoping that… no matter how big a fool you are… there’s a bigger fool out there to buy from you at an even higher price.
As our analysts have shown, you don’t need to take wild punts on meme stocks and cryptos to move the needle on your wealth.
The list is long… But for instance, Teeka Tiwari has handed readers of our Palm Beach Confidential advisory the chance to make gains of 9,193%… 30,015%… and even 46,202% on functional cryptos that solve real-world problems.
Nick Giambruno gave readers another standout string of gains at our Crisis Investing advisory.
Last March, he added a tiny psychedelic medicine stock, MindMed (MMEDF), to the model portfolio. And in December, he recommended his readers close this position for a 996% gain.
He also handed his readers the chance at a gain of 2,123% on bitcoin mining stock Argo Blockchain (ARB.L).
That’s okay, too.
Just make sure it’s with money you can afford to lose. And keep your position size small.
A good rule of thumb for moonshot-type bets like AMC is to keep them to no more than 1% of your overall portfolio.
That way, you’re still in with a shot of scoring a big win at the lunatic casino… but you don’t put your existing wealth at risk.
Even if your meme trade gets wiped out, the maximum you can lose is 1% of your liquid net worth.
That may not be pleasant. Egg on your face never is. But your wealth will live to fight another day.
I’ll have more for you on how to build a portfolio of speculations next week. It’s something our other cofounder, Doug Casey, calls the 10 x 10 Approach.
You couldn’t get a simpler way to speculate. And it limits your risk while allowing you to swing for the fences.
Regards,
Chris Lowe
June 3, 2021
Bray, Ireland