Cramer says meme stocks should be offered in the casino, not Wall Street
CNBC’s Jim Cramer said Wednesday that trading meme stocks is more like gambling than investing.
“It is exciting. It’s fun and it’s real, ”Cramer said on“ Squawk Box ”. However, he added, “If you want to play it, I don’t know, you can go to the casino. These should be offered in the casino. … Why are they offered in the New? York Stock Exchange? ”
The Mad Money host’s comments came as shares of new meme trader target, Clover Health, shot up again in the premarket on Wednesday, rising nearly 30% on the opening in the latest wild ride for the insurance company, that offers Medicare Advantage plans extended. However, the enthusiasm fueled by Reddit waned in early trading, and Clover turned negative during the session. It closed over 23%.
The trading frenzy that began in January with GameStop as its main target has recently come back into focus. AMC Entertainment in particular was a Reddit retailer favorite. Other meme stocks that have seen varying levels of interest include Bed Bath & Beyond and BlackBerry – and a new one on Wednesday, Clean Energy Fuels, which is up more than 30%.
Reddit traders have drawn to stocks with above-average short positions, creating the potential for what is known as a short squeeze if stocks are pushed up. Selling short is a bearish strategy that allows investors to take advantage of a stock’s falling price. When stocks go up, short sellers have to buy back their borrowed stocks at a higher than expected price, adding to the company’s value.
“You do everything … you have to try to figure out which one is next,” said Cramer, who previously criticized short sellers betting against GameStop and AMC.
Interactive Brokers founder and chairman Thomas Peterffy also warned Shorts on Monday of the risks of stake in Meme stocks, saying they could reach “unimaginable heights” before returning to Earth. But he added that in the meantime, traders may have to cover their bets with big losses.
Newcomers to the stock market are welcome, Cramer said, but he hopes young people will focus on fundamental investments. He rejected the idea that the best way to learn about the markets is to get involved in trades.
“We have young people coming into the market. We have 10 million people and Reddit. They need to be educated. That’s the solution,” Cramer said. “I know it’s old-fashioned, but I think it would really help because I know some people think a lot of money has to be lost. I like people making money as long as they understand it isn’t Game is. “