Hey everyone, it's Richard watching the plane Bagel. A bit of a different topic today, but one that I've actually done two other videos sort of about the idea that investing won't make you rich probably. It was an idea that I first covered back, I think, 5 years ago when I was getting ads about get-rich-quick trading schemes and investment programs on YouTube, and that I revisited two years after that during the height of cryptocurrencies and NFTs to really discuss the idea that while investing is an incredible tool that everyone should strive to utilize to its fullest potential, it can only do so much. And today, I wanted to revisit that topic, but this time putting it in the context of meme stocks. You might have noticed recently that a YouTuber by the name of James Janney put out a documentary-style video on GameStop and, as he calls it, the cult around it. And something that I actually helped and contributed to. I was one of the people he spoke to when he was doing his research, and I highly

recommend you check it out. I think James did a really good job covering the topic. Uh, but with it now being out, I wanted to add some further thoughts on it. And I know what you're thinking, Richard, meme stocks really. Uh, wasn't that a 2021 thing? And you're right. Uh, the height of meme stocks was really back. Uh, when we had short interest for GameStop specifically above 100%. And people tried and seemingly succeeded in prompting a short squeeze, which is when the people who are betting against the stock are forced out of their position. Uh, because the stock price has risen. And that causes a positive feedback loop. As the stock price rises, it forces short sellers out. The short sellers leaving causes the price to move higher since they have to buy back the stock. And it continues on and on and can cause a surge in the price, similar to what we saw with GameStop. And while it was quite the spectacle back in 2021, and while we did see a more recent kind of jump in

the share prices of stocks like GameStop. It's something that, with the short interest of GameStop now being well below the peak it was back then, most people assume is kind of over and done with. But, as highlighted in James's video, despite the time that's passed, there remains a group of people who adamantly believe that the hedge funds never closed their short positions. Despite the falling short interest, they just started hiding them. In fact, it's believed that the stock is so heavily shorted today with these hidden instruments that the stock is on the cusp of MOASS, the mother of all short squeezes, a mythological short squeeze event so unlike anything we've ever seen before, so immeasurable and unprecedented, it could bring down the entire financial system as we know it and make everyone involved really rich. And while it's impossible to know how many people truly believe this sort of narrative around it, there are a few who continue to really push this idea. Now, of course, people have bought stocks like GameStop for all kinds of

different reasons, and many of which I'm not really looking to criticize or even address with this video. Some people bought it as a symbolic form of protest against short sellers, hedge funds, and corruption on Wall Street. Other people bought it simply because they want to support the company and help the business survive that they have this nostalgic feeling around. And genuinely, if that's your intention, all the power to you. People are welcome to use their money to support the businesses they love. I don't generally understand the affinity for a company that ripped you off on trade-ins, but it doesn't matter; it's irrelevant to the conversation today. It's really about addressing the people who push the narrative of MOASS and the idea that, again, GameStop is going to have this unprecedented skyrocketing of its price, that Ryan Cohen, the CEO of the company, and Keith Gill, or Roaring Kitty, have the secret 4D strategy that they're communicating with memes about when MOASS is going to happen. And so long as people

buy and hold GameStop. They will get rich because I think that type of messaging really draws in people who might be financially vulnerable or otherwise disenfranchised, and I think that makes it really harmful, especially when we don't have nearly enough evidence, as we'll talk about today, to support any of the claims that are circulating. But before hopping into all that, in my two videos, I included this exercise about what it would take to turn $10,000 into $1 million using a combination of savings, time in the market, and the return you earn, with the point really being to highlight that it's a lot more feasible to reach that sort of goal when focusing on exceptional time in the market and consistent savings rather than exceptional investment returns. If, for example, you assume that you could earn a 9% market return annually or about 5.8% in real terms if you assume a 3% inflation rate, and you have 40 years to invest, which is a good chunk of time, you'd have to put aside roughly

$6,100 a year, or about $500 a month, to achieve the goal of growing that $10,000 invested as well as these savings into a million, which is a good amount of money but definitely sounds relatively feasible if you have half the amount of time. However, or just 20 years, to turn that $110,000 into a million dollars at 5.8% real return, then the additional amount of money that you have to save and invest here more than quadruples to around $27,000 a year, or about $2,200 a month, to achieve that million. And if you have just 10 years, you're basically putting aside a salary every year to achieve that amount. And if you decide that over just a 10-year period, you're going to achieve this goal with no additional savings, you're just going to rely on exceptional investment returns, you're going to need 63.2% annually, which is pretty unreasonable when you consider the best performance of people we've seen in the

market on top of the fact that the majority of people who try to beat the market fail to do so. Unfortunately, drawing things back to meme stocks, the initial rally in 2021 and specifically the performance of people like Keith Gill, who made a big bet into just one stock and made a killing, has convinced a lot of people that this type of performance is a lot more feasible. All you need is an unprecedented market-shattering short squeeze that obliterates Wall Street as we know it. But let's spend some time and, uh, poop on some parties, talk about why MOASS again doesn't make a whole lot of sense to bank on. For one, I know that for a lot of people, because of the 2021 rally, MOASS again feels a lot more feasible, but that's an example of hindsight bias and representativeness bias when you consider meme stocks as a whole in the idea that if you just trigger a short squeeze on a troubled business, that you'll get rich. The thesis hasn't really played out in another meme.

stock Bed Bath and Beyond lost 100% of its investors' money after extinguishing investor shares during bankruptcy. AMC is down 90% over the past 5 years despite the meme stock rally we saw. Nokia is down 10%, Blackberry is down 50%, and other honorable mentions like Yellow and Tupperware both not too long ago filed for bankruptcy. So GameStop does stand out more as an exception rather than the rule when it comes to meme stocks, and that again thesis around short squeezes. And to be clear, the company is at less risk of going out of business currently because it did issue more shares when its price was higher, with the company now having $4.6 billion in cash, most of which was given to them by investors. And as I highlighted in James' video, a company's able to survive as long as investors are willing to lose money with them. But ironically, this move, which does decrease the chance of the company going out of business in the near term, also pokes a hole in some of the main

arguments around moas. One of the main pushes of the people really adamant about this movement was that if retail investors bought up most of the outstanding shares for the company, then short sellers would have to pay whatever price the retail investors wanted to buy back the shares to close their short position, something that would trigger moaz. While that was already pretty unfeasible given the size of the company and just the relative size of retail investors who care to do this, it's certainly less so when the company has increased the shares outstanding by 71% since the first GameStop rally, which sort of touches on the second main point here, which is that there's not a whole lot of evidence to support the idea that there is this massive hidden short interest sort of lurking in the shadows. There's this belief that despite short interest, the public figure we have been much less than it was back in 2021, that hedge funds and other companies are still massively short on this one specific company and have just chosen to hide

their short interest using a bunch of different instruments because they hate this company so much, and they just want to crush it. And to be clear, there are a lot of problems with the public short interest figure we have. There's a lag for when it's reported, it's self-reported, and it can be really misrepresentative. So, because we're on the outside, it is impossible to know what the accurate short interest of GameStop really is. But likewise, because of that, we also have very little evidence of massive short interest in the company. Extraordinary claims require extraordinary evidence, and we just don't have that here. The most evidence we have of massive short interest in GameStop and the sort of moaz possibility is just what I would describe as weird things people have noticed in the market. The fact that GameStop has a lot of dark pool activity, meaning that there's a lot of institutional traders trading the position. The fact that the stock sees waves of options trading at times, and the very high short interest of XRT.

retail ETF that includes GameStop. The truth is, it's difficult to explain these things away. No single investor or trader has omniscience over the market, but then people take these things and use that to fuel speculation that hedge funds are trying to take down GameStop and short and distort the company, with people pretty often jumping to conclusions on either incomplete information or just blatant misunderstandings of how markets work. For example, with XRT, even though GameStop represents less than 1.5% of the fund, some believe that the high short interest is because hedge funds are shorting the ETF and hedging every other position by either going long or using swaps or other derivatives, so that they end up with a net short of just GameStop. That won't reflect in the stock's own short interest, despite the fact that there are alternative explanations for why the short interest of XRT is so large, with some arguing that it just has to do with the buggy nature of short interest reporting and

the activity of authorized participants when creating new ETF units, and the fact that the current short interest for this ETF is actually meaningfully less than it was back in 2011, a decade before the initial GameStop rally. So, I think it's actually worth getting into these kinds of things to try and better understand them, and asking people more familiar with the matter why we come across these things. It's important to recognize when someone is making a stretch to try and push a narrative or connect the dots for you. You might say you're forgetting about one thing: Ryan Cohen and Keith Gill, the people with the, again, secret 40 chest strategy, who have been foretelling of the upcoming moaz event through their memes and hidden messages on platforms like X, and all the other personalities who promote GameStop. While there, Ryan Cohen might be able to turn around the company. All that cash on hand does give them the opportunity to just acquire someone else and do something totally different. And there's a chance that Keith Gill ends up being right in

liking the stock and believing in its opportunity. Uh, this video is not even geared at trying to convince people that GameStop's going to fall in value. There's a chance it rises over time. I have no way of knowing, but the same way that banking on MOASS paying for retirement doesn't make for a great investment strategy, neither does putting your blind faith into someone online. Keith Gill has never explicitly played into the MOASS narrative but has told people to explicitly not follow his trades. And well, yes, Ryan Cohen is currently not taking a salary and has successfully sold businesses before. He hasn't demonstrated a track record of turning companies around. He was sued again recently for insider trading around Bed Bath and Beyond, this time by the company itself, with some arguing that he used his online sway to pump and dump the position. And in fact, he recently had to settle a lawsuit for buying a stake in Wells Fargo and trying to influence management without first disclosing the purchase to regulators, which ironically

seems to go against a lot of the calls for further transparency in the space that those behind the GameStop movement call for. Without trying to assassinate any characters here, you do have to consider what someone's done in the past, their expertise, and their incentives, their self-interest, and motivations when considering or evaluating their performance and the information they provide you. Something that goes doubly so when it comes to the influencers and the like who again promote GameStop and other meme positions. There are a lot of personalities out there who care more about keeping a narrative alive than correcting any falsehoods they put out there. There are people who still today argue that any day now Bed Bath and Beyond investors who have had their shares extinguished through the bankruptcy process will somehow get their money back on some merger and acquisition announcement despite the fact that the shares are gone. The company couldn't even find former shareholders if it wanted to. And in the same way, people refuse to let go of the

thesis. There we see similar things with moaz for GameStop. First, it was to share vote the idea that if retail investors all vote for an upcoming corporate action, that it will prove there are fake shares in the market. That didn't happen. Then it was trying to get all investors to direct register their shares to reduce the supply available for short selling. That didn't seemingly do anything. Then it was the return of Keith Gil and the fact that he bought so many call options on the position that when he exercised them, it would surely trigger moaz. And when that didn't happen, it became, well, they have a bunch of cash and maybe they'll buy something and that new business will do better. Which to quickly touch on, a lot of people really are emphasizing this point now. Having a bunch of cash in a company isn't inherently attractive if that business isn't a good capital allocator, if they don't have attractive ROI figures, because you'd be better suited having the cash yourself in hand.

and just putting it in a savings account or treasury bill than putting it into a company that is earning meaningfully less on its investments. So yes, it is possible that the company does something to improve itself from here on out and that it ends up doing well, but you clearly need to take any overconfidence you hear from online personalities highlighting $4.6 billion cash with a grain of salt because confidence online is pretty cheap. We've talked before about individuals like Trey Trades, who was the poster boy of the AMC movement and who later admitted to being wrong in his understanding of markets and even promoting a stock to his followers without disclosure, demonstrating just how careful you have to be putting too much faith into personalities online. Now, are Wall Street firms and CNBC Talking Heads pure of any sin here? Of course not. Are there nefarious actors trying to take advantage of market structures to abuse retail investors? Almost certainly. The one caveat I've always highlighted when talking about mem stocks in GameStop specifically is that

these frustrations are all based on real anger and valid examples we've had of companies taking advantage of the position they find themselves in. But buying GameStop stock, well, people again are welcome to do so. It doesn't really address all that evidence of corruption, is not itself evidence of massive unprecedented short interest in this particular retail stock, and can't manifest these elaborate actions onto hedge funds, no matter how corrupt Wall Street is. And realistically, most money managers probably don't care to play around with the GameStop stock three years into this fervent support for the company. So while it sounds sexy that, you know, buying this position will both stick it to the Man and make a bunch of money, I do think people are just confusing Greed for altruism and righteousness. And if you take away that moaz narrative, I don't think the company would have as much support as it currently has. And while I believe that a lot of people who subscribe to the memo movement and the like have been disenfranchised in some way, again

because of valid factors. Uh, hopefully, that first example we talked about demonstrates how even with normal average market performance, investing can still be incredibly helpful. It's not going to solve all your problems. Uh, it can't. Uh, make up for spending issues if you aren't earning a decent salary. But if you invest prudently, it can be pretty damn useful. So again, with me just really trying to focus on that get-rich-quick aspect of GameStop. Uh, the moaz event rather than just trying to support the company or whatever, which if you're treating this as a gamble or just don't care about the return on the money, all the power to you. It's just a highlight to be careful with who you put your faith behind online and these people who kind of spout this overconfidence about GameStop and the like. Uh, because in the same way that I don't see any financial consequence to the stock rising or falling, these people bear no consequence to convincing people that buying GameStop will make them rich. Anyway, that's a video again, a bit of a

different one, but just wanted to expand on some of the tidbits that, uh, I gave to James for his own video and just broadly discuss kind of the topic of meme stocks and the fact that they probably won't make you rich. Whether you agree or disagree, uh, feel free to comment down below. I try to consider all the arguments here, and if anything comes out to be false or incorrect, uh, I try to address it as quickly as possible. But if you're someone who believes that MOAS is literally around the corner, I'd encourage you or challenge you even, uh, to come to a date by which you expect MOAS to occur or a deadline otherwise, uh, beyond which you'd be willing to admit that MOAS is likely not going to happen. I think it'd be interesting to track those comments and see if people are willing to stick to the dates that they put out if that time ends up passing. Anyway, thanks for watching, give me the time of day, and as always, be safe out there.

Memestocks Won't Make You Rich (Probably)

Investing and personal finance educational videos with a hint of economics, posted regularly.

I'm a CFA and CFP professional working as an analyst for an investment management company in Ottawa. I'm a huge finance nerd and am passionate about the field - I think people lack the resources they need to make educated financial decisions, and hopefully this channel helps with that!

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DISCLAIMER:
The videos on this channel are for education purposes only and do not constitute financial advice. Richard Coffin does not provide recommendations on The Plain Bagel - those looking for investment advice should seek out a registered professional. Richard is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment trades.

Memestocks Won't Make You Rich (Probably)

Memestocks Won't Make You Rich (Probably)

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