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HomefinanceMeme stocks are back. It won’t last, expert says

Meme stocks are back. It won’t last, expert says

Meme stocks are back — and it’s not just GameStop and AMC. Others like Blackberry, Virgin Galactic and Koss are also rallying high.
The reappearance of Keith Patrick Gill, the investor known as “Roaring Kitty,” on social media has made many wonder how far the rally will go and whether we’ll see a repeat of what happened in 2021.
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Roaring Kitty is the guy who was primarily behind the GameStop saga in 2021. On Sunday, he posted a picture on X showing a gamer leaning forward in the chair, indicating intense focus — and prompting speculation among followers that he’ll return to Reddit. The tweet had been viewed by more than 24 million people as of Tuesday morning.
Comparing the current meme stock rally with what happened in 2021 is tempting. But in an email interview, Dan Egan, the head of behavioral finance at investment advisor Betterment, said he believes the current meme stock rally is a more time-compressed phenomenon.
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In 2021, interest rates were low, and people were stuck at home during the pandemic with extra cash from stimulus checks. None of those things are happening in 2024, he said.
“There might be a large body of meme stockholders who bought during the last rally looking to get out,” he wrote.
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“People with a losing stock will be motivated to sell as soon as they’re back to even, which will put some downward pressure on the price as it hits higher price points.”
Still, he said that some investors will have an appetite for this kind of investment.
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“Perhaps fewer people are actively looking to buy a house due to high interest rates, which means their savings aren’t earmarked for a near-term purchase.” he wrote. “This lends itself more towards an ‘it’s ok to take risks, I don’t need this money’ mindset.”
Egan believes that while there is a core group of people who are interested in this kind of investment, it will be less widespread and, therefore, will be over more quickly than last time. He added that these types of volatile price swings do not benefit companies and investors.
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“It makes shareholders more transient and short-termist, harder to negotiate with,” he added. “It can tank acquisition plans and talks and make it very hard to retain senior people.”

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