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CNBC’s Jim Kramer said Wednesday that trading meme stocks is more of a gamble than an investment.
It’s sexy. It’s fun, and it’s real,” Kramer said on “Squawk Box.” However, he added, “If you’re going to play it, I think you can, I don’t know, go to the casino. These should be served at the casino.” He wondered, “Why is it listed on the New York Stock Exchange?”
The “Mad Money” host’s comments came as shares of Reddit’s new target Clover Health surged again on Wednesday, showing nearly 30% at the open, extending the insurance company’s recent road trip to the Medicare Advantage plans. However, enthusiasm waned in early trading, and Clover turned negative in the session. At today’s lows, Clover stock has more than doubled since Friday’s $9 close.
The Reddit trading frenzy that started in January with GameStop as its top target has recently returned to focus. AMC Entertainment, in particular, has been a favorite of Reddit traders. Other meme stocks that have seen varying levels of interest include Bed Bath & Beyond, BlackBerry — and new ones Wednesday, Clean Energy Fuels, which jumped about 20%.
Reddit traders have flocked to stocks with larger-than-normal short positions, creating the potential for what is called a short squeeze if the shares are pushed higher. Short selling is a bearish strategy that investors can profit when the stock price drops.
“They’re going for anything … you have to try to figure out which one is next,” said Kramer, who previously criticized short sellers who are still betting against GameStop and AMC.
Also on Monday, Thomas Peterffy, founder and president of Interactive Brokers, also warned short companies of the dangers of getting involved in MIM shares, saying they could soar to “unimaginable heights” before returning to Earth. But, he added, in the meantime, traders may have to hedge their bets on big losses.
While we welcome new entrants to the stock market, Cramer said he hopes young people will focus on investing on the basics. He opposed the idea that the best way to learn about the markets is by sweating the trades.
“We have young people entering the market,” Kramer said. “We have 10 million people and Reddit. They need to be educated. This is the solution.” “I know it’s old fashioned, but I think it would really help because I know some people feel they have to lose a lot of money. I like people to make money, as long as they understand it’s not a game.”
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