Next question: Will higher interest rates kill meme stonks?
When I think about the meme stock phenomenon, I imagine desperate millennials and gen Z'ers priced out of homes, stuck with student loan debt for irrelevant degrees, earning McWages working for "boomers", and facing an investment environment where the indices are loaded with large cap tech stocks at insane valuations and low interest rates on bonds.
Financial desperation plus the urgency of getting out of their unhappy situations led them to reject the approach of MMM and accept a belief that gambling was the only way anyone could get out of the working class. Living in the parents' basement for 15 years until FIRE just doesn't appeal. In their minds, the people taking the MMM approach are taking a much bigger gamble by working so long and betting long term, running their own clock out either way. The plan of gambling a year's savings at a time until hitting it big seems safer in their minds, because they've lived through two decades of crises and watched buy-and-holders get wiped out each time (certain personalities don't pay attention to the larger trends or think of strategies as something done for decades at a time).
This time next year, we could have a fed funds rate of 1.5% or 2%, inflation at 5-7%, and expectations of more inflation and rate hikes ahead.
Stocks might have much better fundamentals due to earnings growth and lower PE ratios. Thus, on a purely technical basis, buying and holding stocks and bonds will look more attractive, relative to gambling. Additionally, we'll have much better historical data about the poor performance of meme stock portfolios. By this logic, fewer people will be chasing GME or AMC in desperate hope that last year's internet trend will come back, because it will finally make more sense in their minds to B&H index funds. There are already people on WSB cracking jokes about how doing the exact opposite of WSB would yield one a nice return. Maybe the moment is passing?
On an emotional basis though, the volatile events of early 2022 may convince many in the WSB crowd that the indices are more risky than ever, just like the volatile events of 2020 did. The WSB crowd may become even more convinced that their best opportunity lies in lucky options trades or stock picks. Yet, rising rates will necessarily change things. Stocks with most of their hypothetical cash flows in the distant future, like Tesla or Peloton, may go out of favor, and maybe dividend stocks like oil companies or innovative blue chips such as legacy automakers with electric models will take their place. This will seem like a new way to gamble, and so unlike the ways people lost all their money in 2021-22. Maybe we'll see more of the old rationale: "I'll sell puts on this high yielding stock and double down my put premiums until I'm assigned, and if I can do this for X rounds before assignment then the dividends will cover my retirement".
What do you think? Were meme stocks an artifact of high-valuation, low interest rate times or are they a reaction to anxieties that will be more acute now than ever before? Will meme stocks pivot from nearly defunct retailers and tech unicorns to optioning more stable companies?