2021 euphoria is rapidly shrinking. In the first quarter of 2022, markets realized that high inflations represent a major risk for investors. Real inflation rates are at least 10%. This is far higher than the official consumer price index.
The Federal Reserve set a modest rate-tightening schedule based on those low CPI figures. As it accelerates its rate hike policy, meme mania of 2021-2022 will fade faster. Last week, GameStop (GME) posted a surprising loss in what is ordinarily the strongest period.
In the holiday quarter, GameStop posted revenue growing by only 6.21%. Revenue of $2.25 billion is too low to offset costs. The cost of sales was nearly $1.9 billion. For Q4, GameStop lost $147.5 million. Shareholders will not likely dump the stock despite the weak results. Meme investors will hold the stock forever, even if they lose 50% or more in value.
AMC Entertainment (AMC) is also a high-risk meme stock. The company said it would buy 22% of Hycroft Mining. The purchase raises major red flags. The mining firm is a nanocap stock by market capitalization. On the day of the news, HYMC peaked at $2.00. It ended at $1.35 on March 18. Chances are high that the stock will keep falling.
Be wary of both AMC and GME stock.
