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I don't think it's true that everybody's gambling, says Rithotz Wealth Management's Josh Brown - YouTube
Channel: CNBC Television
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uh
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listen i
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i uh
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i think that there are two stories to be
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told about the retail trader and the
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retail investor
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and
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only one of those stories is the meme
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stocks the robin hood uh
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the op the frenetic trading in the
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options market which was one of the big
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features of 2021 and that's obviously a
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very big story and it's undeniable
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anytime you have 25 million new
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brokerage accounts opened up inside of
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12 months people are sitting at home not
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that much to do
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um it's a it's it's like it's tinder so
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we we witnessed that but at the same
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time much less remarked upon and much
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less noticed because it's it's glacial
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and it doesn't make for
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bombastic headlines while it's taking
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place
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in 2021
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etfs took in a record
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950 billion dollars that's a trillion
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dollars predominantly going into index
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funds you know if you pull out arc and
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and uh some of the some of the leveraged
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etfs and some of the more thematic stuff
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which is in the aggregate still small a
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lot of that money went into blackrock
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and vanguard and state street and into
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fairly plain vanilla index products so i
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don't think it's true that everybody's
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gambling and i don't think just because
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you're retail you have to act like an
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ape um but
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both elements um to michael santoli's
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point
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both of those groups and some people are
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both
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have stuck around the data is is clear
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they are not people that were scared out
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of the market because of inflation um
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there are not people that hang on the
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feds every word they are people that
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recognize that the only way to make it
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in america is to be in equity uh
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investor and to own equity in either
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your own business or other people's
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businesses they they have figured out
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that that is the secret and once the
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secret is out um they don't so quickly
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walk away and find something else to do
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so i think the retail investor to say
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they're back is a little bit of a a
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misnomer they never left
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okay so jeff
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let's let's assume let's make the
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assumption here that josh brown has that
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scene center corrected that they never
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left
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if equities are the place to be to
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create wealth over the long term
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are there the retail traders out there
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who would view this resurgence in meme
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stocks as a long-term opportunity or do
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you think many of them are in this
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because that's where the action is right
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now and once things calm down that
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they're moving on to something else
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well dom i think josh did a good job of
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setting the table for sure but what's
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interesting about the retail trader
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they're really focusing their attention
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on this type of volatility but i think
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this deja vu and the meme stocks has
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also attracted some of the hedge fund
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money out there you see like bed bath
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and beyond up nearly 200 percent look at
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the volume just this week dom 75 million
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on average per day if you go back a year
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or two you're looking at a million
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possibly 2 million involves that spike
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in volume speaks to me that traders have
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come in and if i go back to my days at
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the chicago board of trade when markets
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were moving so fast in the pits they
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actually couldn't keep the prices up to
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date on the board they put an f on the
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board for fast market i think you have
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to put an f on the board for some of
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these meme stocks this week because you
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are seeing spike and volume you are
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seeing attraction and i think josh was
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right i know josh you love when i say
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you're right but i think he was right
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this is august and the retail investor
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really never left but now i think you
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have more attention here and it seems
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like if you look at every analyst that
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comes out and downgrades let's just keep
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on talking about bed bath and beyond i
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think 53 of all analysts who are clearly
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overpaid all talk about this downgrade
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they continue to see a downgrade crowd
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like we did on tuesday with baird and
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boom you see bed bath beyond move higher
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so there's only a five percent buy
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rating on the stock but the volatility
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sensational when you talk about being
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attracted as a trader if you can use
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stops and you can understand that this
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is going to continue to be a whip saw
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this is where you want to be in the
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month of august when you wait to see
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what the fed's going to do next when you
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wait to see with this longer term stock
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but this is not a long term play this is
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a ton of fun for the day trader retail
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or professional
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okay so jeff let me just
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oh john wait just wait one second josh
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okay so so jeff
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it seems to me like you're saying among
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the amc
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bed bath and beyond and gamestop kind of
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crew that tri that tribunal so to speak
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right you're only really positive
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on the bed bath and beyond story not so
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much gamestop and amc entertainment well
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you depend on what minute of the day dom
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right we're seeing this type of
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volatility you have to be very nimble
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you have to be willing to cut your
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losses and establish new positions but
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if you're trading these actively as a
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true trader you're not taking a position
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if you want to look at bed bath and
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beyond and say just three days ago the
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market cap was under 400 million and now
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it's back above a billion maybe that
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takeover component has been taken away
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but that's a company that's bleeding
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cash they have less than 100 million
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dollars on hand they have to do a
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capital raise so i am not making a
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long-term thesis or long-term investment
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bad bath and beyond i'm speaking
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specifically with my trading head on not
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my chief investment officer hat on all
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right so josh i'm sorry back to you
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well what i wanted to say i wanted to
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say to add on to um what jeff said which
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i agree with um
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there's
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so i don't know
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i guess a lot of our audience probably
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saw the movie uh uh ant-man uh marvel
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movie and there's a thing where they
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they go into the quantum verse and in
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the quantum verse physics don't apply
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and like all the rules of like how
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things should work or backwards or
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upside down i think that's the case when
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you're talking about
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sub 5 billion market cap stocks that
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catch the the interest of of meme
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traders in uh you know on message boards
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um and this is not new and mike santoli
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referred to this as short intro of 2020
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yeah of 2021 but like we we had meme
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stocks in 1997 1998 when i was a
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teenager and i first started trading we
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had i omega it was the first message
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board darling stock there were millions
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of people in america
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fixated on this little five dollar stock
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that they ran up to thirty dollars um it
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was like a tech stock it was small it
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was easy to manipulate there wasn't a
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lot of coverage from wall street
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analysts um and it became a play thing
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and it went on for months uh and herb
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greenberg was writing columns about it
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so like that's what is that 25 years ago
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so this is just something that can
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periodically happen and the spark could
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be anything which is why an analyst
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covering something like bed bath and
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beyond
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using discounted cash flow it's a joke
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the last thing i'll say is there's a
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degree of what george soros calls
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reflexivity in these particular stocks
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amc is a really great example
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these stocks can the the um enthusiasm
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for these stocks can create an alternate
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reality that becomes the actual reality
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so in the case of amc
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they were able to sell
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so much additional stock to the public
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which by the way they're going to do it
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again
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that they saved the company this was a
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zero if it hadn't become a darling of
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the tr so the traders who who got
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involved with amc actually are the
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reason that amc is not in chapter 11 and
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and the stock still exists so that's a
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really interesting component as well so
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let's say bed bath and beyond is
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bleeding cash i don't i don't look at
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the balance sheet i i assume it is um if
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they can keep this stock levitating long
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enough to drop a spot secondary or do a
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rights offering or
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or a pipe or something they actually can
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reverse some of the problems plaguing
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the company and change its very reality
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so when you're in an environment like
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that it's it's the quantum verse throw
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out a lot of what you think you know
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about why stocks go up and down and just
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accept the fact that traders can assert
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a powerful force that has physical
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impact in the real world
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you
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