Was the GameStop phenomenon just a big pump-and-dump scheme?

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UUnless you’ve been overseas or living in a cave, it’s hard to escape the short squeeze phenomenon that has been playing out in US public markets. The ongoing battle between hedge funds and the investors on the WallStreetBets subreddit has hit the headlines. It was a godsend for a select group of dealers. But where there are winners, there are also losers.

On this clip from Motley Fool Live accepted at January 28th, “The Wrap” host Jason Hall and Fool.com employee Dan Caplinger debated the ugly truth.

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Jason Hall: So Flying Snow, another Jason, people with the best names come here I just want to say. Jason continues to follow me Twitter and we exchanged a little bit about everything that was going on. I am steadfast that with this whole short squeeze thing, WallStreetBets thing, his retail investors will be the ones who will end up taking the most damage.

At the end Jason says: “Okay, I’ll add humbly. Don’t chase noise, rumors and chat rooms, follow your own thesis.” I want to read this because for me it is basic principle. “Pursue your own thesis, do not chase after noise, rumors and chat rooms. Focus on long-term growth, stable values. “

It’s one thing to speculate, folks. Company like Nano-X (NASDAQ: NNOX) That’s zero income and trying to build a business, but you see prospects. It’s a different thing to play. That is the bottom line. As different as it feels, this WallStreetBets thing, the subreddit, it feels different. It’s like Walt Disney (NYSE: DIS).

Let me explain. Walt Disney, people who are pessimistic about Walt Disney say they are pessimistic about Walt Disney because the cable is dying. It doesn’t matter the cable dies, you own the contents. People want the content.

Reddit is just another way of serving content to people. It feels different. But you can fall into a subreddit equivalent to a penny stock pump and dump newsletter just as quickly as 10 years ago you could have gotten onto an email list for penny stock newsletters.

It is a way for people to send a lot of information to many people at the same time, sometimes for purposes that are specifically beneficial to them and potentially harmful to other people. This was essentially a big pump-and-dump.

The fact that they made it public, the fact that it was all about trading and promoting them, and they made the enemy, Wall Street’s hedge funds. These guys are still flying first class, and it’s the folks who followed late who used their rent money to buy GameStop (NYSE: GME) at $ 400. The thought that they would still be able to get into it, these are the people who are getting hurt. That is the bottom line.

Dan Caplinger: Jason, I just have to add one thing.

Jason Hall: Please.

Dan Caplinger: The thing about the chat room. The chat room is only as good or bad as the people who are in the chat.

Jason Hall: There you go

Dan Caplinger: We have a great chat room here in the form of the premium discussion forums that all of our members have access to. The conversations there are very different from those in WallStreetBets or something like that. Don’t think that people can’t get together and have a good investment experience, they can. It just takes the right mindset. When you have this common mindset, it can work wonders. You can make all kinds of good things out of it. Don’t knock that. Just be careful not to focus on the wrong thing.

Dan Caplinger owns shares of Walt Disney. Danny Vena owns shares of Walt Disney. Jason Hall owns shares of Walt Disney. The Motley Fool owns shares of and recommends Twitter and Walt Disney. The Motley Fool has one Confidentiality Policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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