BloombergTV via YouTube
- Bill Gross says the wild, speculative boom in meme stocks, SPACs, and NFTs is over for now.
- The "Bond King" predicts GameStop will crash next after AMC shares tanked on Monday.
- Easy money fuels demand for fun investments, but cash is harder to come by now, Gross says.
The era of market silliness is over, and GameStop will be the next meme stock to capitulate after AMC Entertainment shares crashed this week, Bill Gross has warned.
"Another Meme bites the dust — AMC," the billionaire investor known as the "Bond King" tweeted on Monday. The movie-theater chain's stock price tanked 36% on Monday, after it reported disappointing quarterly earnings and signaled it might issue shares to repay its debts, at the cost of diluting its existing shareholders.
"Here's the bigger point: easy money promotes SPACs and NFTs and Memes etc," Gross continued. "When money is no longer easy lots of fun ideas bite the dust."
Gross, who cofounded Pimco and managed the bond giant's flagship fund, was nodding to the speculative boom during the COVID-19 pandemic. Interest rates were nearly zero, inflation wasn't a concern, and the US government was mailing out stimulus checks, meaning people had spare cash to burn.
Against that rosy backdrop, many investors piled into high-risk investments like special-purpose acquisition companies (SPACs), non-fungible tokens (NFTs), and meme stocks like AMC. However, the Federal Reserve has now raised rates to over 5%, inflation and recession are very real threats, and many banks are lending more cautiously. The upshot is that Americans have reduced access to cash now, deterring them from making frivolous investments, at least in Gross' view.
"And another one gone and another one gone and another one bites the dust," Gross said in a follow-up post, quoting lyrics from "Another One Bites the Dust" by the rock band Queen. "GME is next — just my opinion."
Both AMC and GameStop shares have plunged since the 2021 meme-stock boom. However, the former has erased virtually all of its gains from that era, whereas the latter still trades about five times higher today than it did in late 2020.
Gross clearly expects GameStop to follow AMC downward. Yet it's worth noting that he's labeled meme stocks "nonsense" in the past, and bet against both companies at the height of the buying frenzy. He ended up making about $20 million from the trades, after initially losing enough money to keep him up at night.