Andrew Ross Sorkin is the co-anchor of Squawk Box on CNBC, founder and editor of Dealbook at the New York Times, and the author of “Too Big To Fail.” He joins Big Technology Podcast to discuss the wild state of the market, the rise of meme stocks, along with bitcoin, SPACs, Big Tech antitrust, Elon Musk, and when the party will come to an end.
Alex Kantrowitz: Andrew, welcome to the show.
Andrew Ross Sorkin: Thank you for having me. I am a longtime fan and listener, first time on the show.
What’s your sense of the market’s rationality right now, or lack thereof?
Well, we have to break apart what we’re describing as the market for a second. There’s one part of the market that is this meme stock driven explosion, and that is something unto itself. Then there is the market excluding all of that. And then there is this thing we’ll call the “real economy” over here. They’re all potentially interrelated, or you’d like to think.
The stock market unto itself — meme stock excluded for a second — there’s lots of excitement still about where we are, but you’re even starting to see what they call, “the great rotations,” or people moving out of technology and into travel, because they think everyone’s going to travel again and all sorts.
That seems at least rational. And we can debate about whether there’s going to be more infrastructure spending or what the Federal Reserve is going to do. But what’s really caught everybody’s excitement or the meme stocks, the AMC apes and the GameStop hysteria. And don’t forget Bed Bath & Beyond or some of the others that are completely and utterly divorced from reality, Alex.
It’s a bunch of people who have an idea, I don’t the idea is about fundamental investing, it’s about demonstrating that they can push up the price of a stock. I hate to use the word manipulation, and people will get very angry if you put it in this context. But I think there’s a group of people who would like to press the price of a stock up. And you’re seeing it in this very unique social media enabled, mobilized moment.
Some of those people are doing it because they actually believe in the stock. Most of them are doing it to prove something. Other people are doing it, hopefully just to make a lot of money because they think they can ride a wave. There’s a lot of elements to this.
There’s an argument that this is totally normal, that all stocks are traded on momentum and stories. And so what if a GameStop, or what if an AMC, is traded on a story? People are only getting mad when it’s the common person doing it versus traditional investors. What do you think about that?
I don’t buy it. I just don’t buy it. First of all I would love the “little guy,” I even hate that phrase, to be wildly successful and to beat the man. I would love that. I’m not even sure that’s what’s even happening here. But there is, I think a distinction between what’s happening in this meme stock era and the frankly blatant manipulation that happens — to the extent that we’re going to call it manipulation — in the market via institutional investors. And the biggest distinction I’d make, is that one group, the professional investor, typically knows what they’re doing. They understand it, and they understand the risks of it. If you spend enough time on Reddit — and for better or worse, I do — there are a lot of people that don’t really understand what’s going on at all.
There’s a lot of misinformation. There’s a lot of people who don’t even believe information that’s factual in front of them. This financial moment’s almost become politicized in certain ways. And some of the things that we’ve seen in politics over the last four or five years, it’s come to the market. And so I worry about that and I worry about the people who have frankly, a lot to lose. And that’s why we’ve always, as in we, as an industry, the media, but hopefully the laws and regulations that are in place have always been about trying to protect the smaller investor.
What’s so unique about this moment, is that a lot of those smaller investors are saying, no, no, no, those laws you say work in the media, they don’t protect us at all. In fact, you’re not protecting us, you’re protecting the man. You’re protecting the establishment. You’re protecting the big guy with all of those laws. And you’re preventing us from having the opportunity to make money. And to some degree they’re probably right. They’ve actually hit on something. Some of those rules and laws and maybe even the way we approach it, do prevent some of them from buying some of those lottery tickets and winning.
But I think, or at least I want to think, unless my head is not screwed on straight and I’ve got this totally wrong, I think it’s also about protecting them on the downside. And it’s almost impossible to believe that the downside won’t come.
The other counterpoint would be that GameStop has actually stayed pretty high. I’ve been surprised at how high it stayed. Who knows if AMC is going to drop given the current levels? So maybe the joke really is on the short sellers…
Well look, maybe it is. Maybe it really is and you’re right. Look, there are people who believe that Ryan Cohen who’s now been installed as the chairman and the new team, most of whom come from Amazon are going to reinvent the company. And maybe this is a venture capital bet that these folks are going to somehow totally reinvent this…
Read More: Andrew Ross Sorkin on meme stocks, bitcoin, SPACs, antitrust, and Elon