GameStop and Fraud PSA

Social Organized Buying – Cult Behavior

The classic meme stock GameStop is back in the narrative this week. I’ve seen many articles about GameStop expressing concern, disbelief, valuation advice, cautionary tales and anger over market manipulation. The power of Twitter influencers is not fully appreciated. Twitter was responsible for accelerating the collapse of Silicon Valley Bank.

Keep this math in mind when considering meme stocks: 100,000 Twitter users with $10,000 each have $1B in purchasing power. Roaring Kitty has 1.2million followers. For context, that is the account run by the original GameStop retail trader who turned $50k into $20m+ and ended up testifying in front of congress. He’s been completely absent from social media for three years and I think most people who had followed his story wondered if he had retired from social media for good. Dave Portnoy of Barstool Sports has 3.1million followers, Reddit’s wallstreetbets forum has 15million followers, and Elon Musk has 183million followers.

These accounts have tremendous cult-like followings, and their actions can move markets, especially small caps like GameStop. Last month, GameStop had a market cap of $3.5B. Over $20B in GameStop shares traded this week so far since Roaring Kitty re-emerged. Like Bitcoin, these social media organized buying trends operate like cults. Membership in the cult is based on buying the stock or the asset. GameStop’s and Bitcoin’s cult is driven by anti-establishment angst and a feeling of “us vs the man.” Short-selling hedge funds lost an estimated $5B by being on the other side of the trade. This won’t be the last meme stock event, and I think framing it in terms of the scale of social media influence and cult behavior makes the most sense. These meme stock events are not necessarily “bad” or “wrong”; just a new reality.

Fraud PSA

I heard two stories this week from friends scammed out of relatively decent sums of money. One went to buy a vehicle from someone they knew personally on Facebook. The context was an estate sale due to a death in the family. Unfortunately, the account had been hacked, so the first transfer, Zelle’s daily maximum, was sent directly to the scammer.

I routinely get scam emails impersonating investment firms, payment companies and occasionally people I know. Consider these points whenever money is involved.

• Get on the phone every time. The best scammers will do everything they can to mimic the tone, cadence and context of the people they are trying to impersonate. Impersonation is relatively easy over text, but it’s nearly impossible to do over the phone, even with AI.
• Ignore urgency. Everything can wait. Wires, payments, etc can always wait a day or a week. The more the other person gets impatient or riled up, the more likely they are a scammer.
• The volume of scams is high. Every time I look in my spam folder, I see a different fake invoice or someone impersonating a vendor or employee.
• Facebook is a favorite for scammers. Fake profiles and hacked accounts are common. Unfortunately, fake long-distance romantic messages are also common and effective, particularly when the target is going through a hard time or is lonely.
• Never click links. If you get an unexpected email or text message from a bank or payments company like PayPal, open a separate window and go to their site directly. Don’t click anything if you don’t recognize it. It’s pretty easy for a scammer to copy an official website format to ask for your credentials; then, they will have your login info for the actual site.