"Sell The Dream": Social Media Market "Influencers" Are Netting Millions Pumping Meme Stocks
Still wondering how the "meme" stocks wind up getting a sufficient underground "buzz" behind them that's robust enough to help move markets?
Look no further than the "social media stars" that are helping to move the markets, The Wall Street Journal writes this week. In a new article, the Journal not only profiles several people who make their living covering meme stocks (i.e. pumping stocks), but also offers up tips on how to become a meme stock influencer yourself.
The first "influencer" the Journal covered is 29 year old real estate broker Kevin Paffrath, who posts on YouTube as "MeetKevin". He has 1.7 million subscribers on YouTube and, most days, "live-streams on the platform for several hours, talking about the stock market and doling out investing advice in a rapid-fire, self-deprecating manner".
Paffrath said: “I used to spend three or four hours with one client talking to them about real estate they could buy for below market value, and if I was lucky, maybe after 90 days, that one person would turn into $10,000 dollars in revenue. Today, $10,000 in revenue is a bad day for me. Influencing has crowded everything else out.”
He has earned $5 million in the first three months of 2021, according to the report. And of course he drives a Tesla...
Another influencer, 23 year old Jack Spencer, interviews CEOs in front of his liquor cabinet wearing a shirt that says "Not A Financial Advisor" on it. He has 94,000 YouTube subscribers.
Cameron Newell, yet another influencer who goes by the name "CamTheMan", says he's made $5 million from day trading. He has taken to TikTok and Discord to offer up his advice on stocks.
Sarah Petite, a social-media consultant in Los Angeles, told the Journal: “This generation is looking at their parents and saying, ‘The way you thought about money? That isn’t how it works anymore.’ ”
One 33 year old investor, Rex Wu, said of the free influencer content available online: “If I were to walk into J.P. Morgan tomorrow, they have the bias of trying to earn my business, and they might be trying to oversell me. Guys online don’t really have anything they’re trying to sell me.”
Vying to be an influencer yourself? The Journal lays out three tips that can make stock influencers successful. The first is to "be relateable".
32 year old influencer Rose Han said: “If you turn on CNBC, it’s all these older white guys, and it’s hard to relate to them because I don’t look like them; a lot of my followers don’t look like them. Being a woman, women trust me more, because they’d rather learn from someone like me than from a finance bro.”
The second tip is a bucket shop classic: "sell the dream".
Ted Klontz, a professor of behavioral finance at Creighton University, commented: “A lot of this world is a real snake pit, and it’s really scary. The human brain doesn’t come into full maturation until age 25. Anyone under that age is highly influenceable. We know that day trading does not produce long-term wealth for the vast majority of people who do it, but these influencers are preying on that part of the human brain that has fewer inhibitions, that thinks: ‘I will be the exception.’ And that leads to speculation and other kinds of very high-risk behavior.”
And finally, the third and final tip: there's just no room for being bearish.
Scott Galloway, a marketing professor at NYU, points out why this "strategy" is so effective: “For their entire adult life, the market has gone up. If you say otherwise, you just don’t get it. There is a surrender-to-the-narrative-or-else attitude online, and it’s really frightening, because if you say bitcoin is overvalued, or Tesla is overvalued or whatever popular SPAC is overvalued, these trolls in anonymous accounts come out of the woodwork and start attacking you.”
And of course, there's the pesky truth that "many of these influencers have no formal training as financial advisers and no background in professional investing, leading them to pick stocks based on the whims of popular opinion or to dispense money-losing advice," the Journal is forced to note.
But why let that stand in the way of a good meme stock story?
You can read the full profile of other influencers here.
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