• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

The Genie Is Out of the Bottle, the Beast Has Been Unleashed

Leverage is a very, very, dangerous drug.
By JIM COLLINS
Jan 28, 2021 | 10:10 AM EST
Stocks quotes in this article: GME, AMC, TWTR

I'm not internationally known...but I'm known to rock the microphone. I was fondly recalling Rob Base's famous lines from "It Takes Two" this week. In the past five days I have received questions about the U.S. stock market from contacts in the U.K., Germany, Australia, Thailand and Brazil.

As I've mentioned in a recent Real Money columns, I am working on a project in Brazil, and more on that soon. The other (and truly better) half of the Portfolio Guru family has strong connections in China, South Korea and Japan, and her WeChat is lighting up with U.S. stock-related questions this week as well. I guess the question no one ever wants to be asked is "Honey, should I buy GameStop (GME) ?" Attempts at domestic bliss aside, I have learned that sometimes the best response is "I don't know." I really don't know. I told her that Wednesday, and I am telling the rest of the Web-enabled world in this column today.

There is some weird stuff going on up in here. This week's action in GME, among others, is even more evidence that the markets are easily manipulated. They always were, but I can't think of a more guilty troika than Jerome Powell, Robinhood and the newly named Treasury Secretary Janet Yellen.

It's their fault. This is what free money hath wrought.

It is not pleasant to look at and it gives my industry -- the only one I have ever known since I was a 15-year old bike riding intern in the financial Mecca of Lebanon, Penn. -- a bad name. You know what? We deserve it.

But this is a product of zero-interest rate policies, and now the scalps are hitting the wall. TD Ameritrade has "limited" trading in GME (andAMC Entertainment  (AMC) ) and they won't be the last names to lose trading liquidity. The speculative frenzy that has driven this market -- again, aided and abetted by Powell, Mnuchin, Yellen, and pretty much everyone in D.C. other than Paul Volcker (who died in 2019) -- is not about to go away. The genie is out of the bottle. The beast has been unleashed.

As Toby Keith sang (he was actually talking about adjacent bars in Nashville) "Well, there's Winners and there's Losers." That's the thing. I don't feel bad for the losers at all. I had never heard of Melvin Capital before the other day, and I really don't care if they and other hedge funds go broke. Leverage is a very, very, dangerous drug.

But so is the media. And the mess that is our U.S. media in 2021 unfortunately extends to the financial media. They give platform to the likes of Andrew Left at Citron, thereby making ordinary folks think he has some special knowledge  or that he is running a large firm (he's not) and, most gallingly, that we should pay attention to him. Erroneous on all counts.

We are all playing poker in this market and that's where the "tell'' comes in. Left used Twitter-owned social media channel Periscope to put out his sad song on GameStop. That was THREE HUNDRED points ago. But, as Marshall McLuhan said, the medium is the message.

I honestly have never been on Reddit in my life, so I can't offer an opinion on it or the ideas found there. But Twitter (TWTR) is an abomination, in my view. 

So, that's the lesson here. Don't attempt to get investment ideas from Twitter. And, for goodness sake, deactivate your account. It takes 30 days for full deactivation to occur after the initial request -- my Emancipation Day will be Feb. 6 -- but it is worth it to be free from idiotic comments.

But Twitter isn't causing GME to go crazy -- and platforms like TD Ameritrade to restrict trading in it -- it is simply our two old friends: Fear and Greed. These two have ruled Wall Street from the days trading actually took place on the Street (that's really the history of the now-defunct "Curb," the AmEx, not the NYSE) and they are not retiring any time soon.

So then, buy companies with strong fundamentals, solid balance sheets, and leave the crazy kids' stuff to...the crazy kids. It's never boring, but when folks who aren't regular players start to enter the game, that's when people get hurt. Don't get hurt. Ever.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jim Collins had no position in the securities mentioned.

TAGS: Short-selling | Economy | Federal Reserve | Investing | Markets | Stocks | Trading

More from Stocks

This Market Might Make Your Head Spin

James "Rev Shark" DePorre
Mar 8, 2021 4:40 PM EST

The rotation out of technology and into 'reopening' plays is driving the deceptive action.

'F' Is for $14

Mark Sebastian
Mar 8, 2021 2:53 PM EST

Ford as some serious FOMO behind it.

I Wouldn't Be Surprised if Palantir Technologies Worked Lower in the Weeks Ahead

Bruce Kamich
Mar 8, 2021 2:40 PM EST

Making recommendations about stocks that are thinly traded or are new issues is always a little 'dicey'.

How Does Dick's Sporting Goods Look Before the 'Big Game'?

Bruce Kamich
Mar 8, 2021 2:05 PM EST

Let take a look at the charts ahead of Tuesday's earnings release.

I'm Not Blowing Smoke With This 'Boring' Trade

Timothy Collins
Mar 8, 2021 1:46 PM EST

Given the rotation away from tech and growth, look for the market to at least make an effort at a breakout push here, taking PM with it.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:38 AM EST GARY BERMAN

    The INDU and DIA

    FIBOCALL: The INDU index and the DIA The INDU ...
  • 10:44 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "The Challenge of Short-Selling"
  • 08:40 AM EST PAUL PRICE

    Recent Pick SpartanNash (SPTN) Raised Its Quarterly Payout by 3.9%

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login