Day Traders Pumping Up ‘Garbage’ Stocks Thanks to Social Media: Experts

The volatility and speculation in the stock market since the COVID-19 lock down has been unprecedented, and this hasn’t been lost on Mad Money’s Jim Cramer.

“I’ve never seen so many games played with stocks, which is that, ‘Hey, we’re taking this one up today. We’re taking that one up today,'” said Cramer.

“Please be careful when you see a reference in Twitter which says ‘we’re taking up Hertz’ or ‘get on board the Chesapeake train,'” the TV host known for promoting stocks warned.

“Because you’re not going to be the one that makes the big money. You’re likely going to be the one that loses the big money.”

Cramer’s advice is to buy fractional shares of less volatile stocks so that traders may learn about the market instead of diving in headfirst.

“I do want them to understand that you can do small dollar stocks now like never before, it’s just that you have to do it in fractions.”

“And that fractions is a great way for people to learn how to buy an Amazon or how to buy an Alphabet, so I just wish that they would switch the direction from companies that may be bankrupt or overvalued,” said Cramer.

The increase in day trading has been pinned on everything from retail investors trying to catch up to the rally, the rise of commission-free trading, the lack of sports betting, and the $1,200 stimulus check the government sent out earlier in the year. 

‘Garbage for sale’

One of the more shocking stories in this speculative stock market has been Hertz. 

Hertz declared bankruptcy on May 22nd, and since then, double-digit percentage moves in its stock price has not been uncommon. 

There has been so much interest in Hertz, that even though it has filed for bankruptcy, it recently issued $500 million in new stock. The stock offer was later rescinded under pressure.

“As an intellectual proposition, most securities experts had always thought you could offer garbage for sale to the public as long as you said ‘We are offering you garbage, and you really shouldn’t buy this, but you have a chance to buy it,'” said Harvey Pitt, chairman of the Securities and Exchange Commission (SEC) under former President George W. Bush.

“No one ever really anticipated that people would be gullible enough to do that,” he said.

“It’s like musical chairs, and someone is going to be left without a seat.”

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