The meme stock rally is fizzling out as shares of both GameStop (GME) and AMC Entertainment (AMC) are falling after two days of massive gains. Financial Analyst and YouTuber Kevin Paffrath joins Market Domination to discuss the meme stock craze following the online return of “Roaring Kitty.”
“It feels like we’re back at the beginning of 2021,” Paffrath says of the meme sock action. He adds that he sees meme stocks more as “momentum stocks,” as it ultimately boils down to volume. When getting into momentum stocks, Paffrath says that investors should go in prepared to lose 100% of their money as these stocks move quickly.
He notes that the rally in 2021 was fueled by the stock market “going straight up” for nine months. He also points to people using their stimulus checks toward momentum stocks, which allowed companies like GameStop to take off. However, as inflation remains sticky, wallets are tighter and fewer people are willing to invest in momentum stocks this time around.
“It’s sort of like playing the lottery,” Paffrath says. “People don’t generally care about the mechanics behind it. They just want to make money, and I don’t blame that because times are tough,” he adds.
He also highlights how these rallies are great for the companies, analyzing how AMC “basically got three months of free operating expenses to pay for their employees and their theaters" from this week’s gains.
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