Social Investing: Beyond Hot Stonk Tips
The passion economy is booming. Elon is pumping Dogecoin. Influencer marketing is starting to take over. But what does this mean for the future?
Certain individuals have outsized influence (due to large social followings). Like Roaring Kitty drove the GameStop short squeeze, other influencers will pump their stock prices. Some don’t even mean to pump the price, their influence is just so large that it happens.
Social investing is already happening. GameStop and Dogecoin are the clearest examples, but they are just the tip of the iceberg. A few other examples are Tesla (Musk) and Penn National Gaming (Portnoy). Right now we are early into social investing with groups naturally emerging in social media. A few examples are WallStreetBetz (reddit), FinTwit (Twitter) and FinTok (TikTok). Eventually social apps could natively have brokerage functions connected to them.
However, social investing is about more than just pumping valuations. Stocks driven by influencers have real value too. Tesla never needs to spend a dime on marketing, because they have Elon (and a cool product). Penn is very similar, but has a more powerful financial future given their unit economics.
Social investing is getting so wild that even index funds are getting pumped by influencers. Ark Funds pump like crazy across FinTwit. Maybe it is for good reason, but Cathie Wood is no doubt an influencer with a cult following.
My bet is the future of investing just keeps getting wilder. I see a dramatic increase in the level of pump and dumps driven by influencers. They will cash in their credibility for cash (or Bitcoin). Many of these investments will be akin to gambling. How should this change the way you invest? I don’t think it should. Unless you feel you have some sort of advantage in timing the market, I’d avoid it. Buy and hold investors will be fine, but just might need to endure more volatility. Opportunities will emerge for buy and hold investors due to these changes though. If you see an influencer (like Portnoy) take a major position in a company, pay attention.
