This Is What Happened to the Meme Stock Mania

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, you know what was really fun last year was GameStop. That was a really good time, wasn't it?

Tracy Alloway (0:24)

Yeah, plus a land war in Europe that we haven't seen for many, many decades. But yeah, retail mania was this big thing that happened in early 2021 And I'm just looking at the chart of GameStop. That was sort of the flagship stock for meme stonk mania. And it looks like, if you zoom out now, it kind of looks like an earthquake, which in some sense, it kind of was. It was this thing that just shook up the entire market. And people at the time were saying that this was the end of capitalism as we know it.

Joe Weisenthal (0:57)

Yeah, it does. It definitely feels like so much has happened over the last year. I mean, we've had a pretty big sell off in areas of the market that are really hot. It's been a long year.

So many different things have happened over that time. So many new narratives, obviously tons of focus these days on inflation and so forth. That whole period, it really seems like ancient history, but honestly, it was really not that long ago. I think Matt Levine has had some columns saying things that like, oh, if GameStop is still trading above 103 months, I have to retire because all of markets are broken.

And I think it was still there or it definitely lasted a long time. And that's kind of the other weird thing about these sort of these manias, which is that you can identify them as a mania sometimes in real time or say, oh, this is ridiculous. This is overvalued. But it's really hard to like call them at the time. It's really hard to time the trades.

Tracy Alloway (1:51)

Yeah, I think that's right. But there was also this aspect of GameStop where people were treating it, you know, not necessarily as there were plenty of people treating it as a speculative bubble, but there were some people who just said, I like the company or I like whatever this stock represents to me and I'm going to buy it, almost using it as sort of like, go fund me for the business.

Joe Weisenthal (2:14)

And I'll say one other thing that I think is really important in all this, which is that, you know, at the peak, you know, it got started in the spring of 2020 Like that's really when it kicked off. That's when we had the explosion of new people trading. A lot of people who are staying home, either they were working from home, people had lost their jobs. And so you had this explosion of people who are getting into retail trading, options trading, opening up a Robinhood account.

And for the first time, like, I guess, really since the late 90s, into the.com bubble, it was the first time in basically 20 years in which it felt like stock trading was like part of the environment, part of the culture, and something that people were just talking about, their individual stock holdings, in a way that really, yeah, I don't think had been the case for at least 20 years.

Tracy Alloway (2:59)

Right. I mean, I remember there's a, there's a doorman who works at a hotel in New York, who I know who was asking me about Tesla options around that time. And that, you know, like it's verging on the famous JP Morgan shoeshine boy kind of thing, when the doorman starts asking you about what options you should be buying for Tesla.

But yeah, it definitely was a cultural event.

Joe Weisenthal (3:21)

Right. It was really, it was really a cultural moment. And so I'm really interested in like what became of that. And I have my suspicions, you know, my guess would be that a lot of people have now lost their money, they lost their gains, that they experienced during the pandemic, maybe they're disillusioned. We know that trading volume is down, but I also have to imagine there's at least some people that have done well.

You know, they've used this moment perhaps to learn more, wanted to further their own education, become deeply interested in how the markets work, how options are priced, how trading works, how to evaluate an investment. And so I suspect that at least some decent percentage of people got excited about the market from spring 2020 to 2021, 2020 to 2021 have stuck around and really furthered their knowledge to quite a degree.