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Meme Stocks
Old 06-09-2021, 08:06 PM   #1
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Meme Stocks

Not that I will do anything like this. But it was more of a mental exercise. Please feel free to tell me if I have gotten any of this wrong.

So with all of the craze of buying meme stocks like AMC or GME. I got to thinking. What if I gambled a bit, just to see what would happen. You never know. A very few of those folks did become millionaires in a very short amount of time. But then I realized, if you did this in a brokerage account, it would actually be a foolish move.

Because let’s say you lucked out and hit it big. Like millions sorta big. Well if you try to get your money out, gonna get hit with a 37% tax. That is a lot of money to lose. You could let it ride for a year to get to long term capital gains tax of 20%, still a lot, and never gonna stay that high for that long.

And then I thought… what about purchasing this inside of my ROTH IRA? Tax free forever, and if I did in fact hit it big, the very next day I could transfer it all into a money market fund and not loose it. And inside of the ROTH it is not a taxible event to move to a different fund. So at 59.5 I would get ALL of it 100% tax free. Not 37% tax, or 20% tax… NO tax!

And even if I wanted to get to it early, I still still pull out smaller amounts at a time. So that would be my standard tax rate, plus 10% penalty. But that would not be on the entire amount, just the amount I would withdraw.

Thanks for taking a look at this. It was fun to think about for a few…
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Old 06-09-2021, 08:13 PM   #2
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Of course if you lose money, you don't get the benefit of a loss to write off against gains or income (up to $3K).
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Old 06-09-2021, 08:17 PM   #3
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Why do they call them MEME stocks, someone asked me that on the weekend and I don't know.
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Old 06-09-2021, 08:19 PM   #4
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Why do they call them MEME stocks, someone asked me that on the weekend and I don't know.

I think it refers to social media attention.
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Old 06-09-2021, 08:22 PM   #5
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I think it refers to social media attention.

I was guessing that Twitter stoked all the buying attention. Same thing basically.
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Old 06-09-2021, 09:37 PM   #6
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Well some of these folks can't spell Roth but they're learning fast. There's also some pretty smart people with diamond hands.
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Old 06-09-2021, 10:05 PM   #7
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Paying the tax is not an issue if you made money. with something this risky I would do it taxable.
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Old 06-10-2021, 06:09 AM   #8
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You can't write off all those losses in a Roth account.
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Old 06-10-2021, 06:24 AM   #9
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Paying the tax is not an issue if you made money. with something this risky I would do it taxable.

Agree, there is an old saying "Don't let the tax tail wag the dog". Assuming you made big profit in the scenario, just take the profits and pay the tax. It is good to think about minimizing taxes, we all should do that. But in the MEME stocks case it seems best to use a taxable account. Especially since their is higher chance of loss than gain. Very volatile is an understatement. You need to be lucky on market timing with the MEME stocks.
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Old 06-10-2021, 06:31 AM   #10
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Thanks for taking a look at this. It was fun to think about for a few…
Well, this is the rationale for holding equities in your Roth. It's not a solid rationale for throwing money on the roulette table...
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Old 06-10-2021, 06:31 AM   #11
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How about choosing random letters and investing in those stocks for a year?

First formula gets you 1-letter symbol, second formula gets you 2-letter etc.
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Old 06-11-2021, 07:55 PM   #12
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One stock I have and am positive on at least right now that is sometimes mentioned as a MEME stock is PLTR Palantir. I do not know if this will work out financialy but based on comments from some software friends it is a good quality company. I expect to hold it at least one year and then decide to keep it or not. Again, friends did not make any comments from a financial perspective but I think a lot of MEME stocks seem to have crappy products.
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Old 06-13-2021, 10:32 AM   #13
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I also have a small position in a stock that is getting some MEME notoriety. I purchased WKHS well before the whole USPS contract heated it up simply because an electric delivery van makes so much sense.

I watched the price go up, then watched it go down when the contract expectations were dashed. That’s ok, I still think it’s a great idea and I’m not a ‘trader’ anyway.

Now it appears there are three disparate groups talking it up. One group is like me, think it’s a decent small cap that’s worth backing. One group maintains some portion of the USPS contract will still be awarded to them. And then one group monitors short interest and believes there’s a technical basis that will cause a significant price boost when certain options come due this next week. That group has both the hedge fund haters and traders expecting to make a quick buck.

I’m just watching it unfold and trying to learn more about the options market. The level of passion among some of these folks is amazing.
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