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Meme Stock Hyperbole Is Really Out of This World

Have you ever really thought about the phrases 'to the moon' or 'conviction buy,' and how they mess with out perception of fair value?
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Gamestop (GME)  to the moon.

AMC Entertainment (AMC) to the moon.

Dogecoin to the moon.

Analysts need to rewrite their ratings systems. This got me thinking what exactly does "To the Moon" mean? I'm guessing "To the Moon" ranks up there with "Strong Buy" or "Conviction Buy." Maybe we add "To Mars" or "To Saturn" as an even higher rating.

Initially, I rolled my eyes at the continued use of the phrase "To The Moon." It's not like Strong Buy with a price target of $65 for instance. To the moon is completely arbitrary and open to interpretation, but then again so are most things about valuation when you think about it.

For instance, when an analyst pounds the table on a stock, how is that different from to the moon? Or when someone says, "all in." Are they really all in? Did they cash in all their assets, pool the liquidity, and buy every share they possibly could? Probably not. Actually, I'd say definitely not 99.9999% of the time. Of course, there's always that one person.

But the point is Wall Street has been arbitrary for years. We can't even have a standard rating system. Is it "Neutral" or "Hold"? And really, do I want to hold something that is only in the middle of your range? No.

The system should be "buy" or "sell." That's it. Black or white. Own or don't own.

But we live for the arbitrary. It sells. It makes headlines. It sounds smart, sophisticated, and educated. In reality, it's no better than double-secret probation. You're either on probation or you're not, just like you're either a bull or a bear.

So, I'm not going to mock the phrase "to the moon" any more than "all in" or "pounding the table" or even the infamous "best ideas list." Because if you're only giving me your pretty good ideas list, why should I care? Spoiler alert: I don't.

And in terms of price targets, again, we're arbitrary. Even fundamental folks will tell you it's based on something. Well, fair value is three times sales. OK, but define "fair." It's based on history, perhaps, but that history was defined by the arbitrary idea of what someone or a group thought fair.

Over time, what's fair changes. This is why the idea something is worth what someone will pay for matters most. It's what someone deems fair. You may not agree with it, but they may not agree with the valuation metric you use to determine fair value.

I do think this idea of "fair evolution" causes bubbles. As the concept of fair evolves and changes over time, we have a reeducation that infiltrates the market. Bubbles are the overshoot as we probe for the new fair or way to value. Then, we reverse course and overshoot to the downside before finding a level where the masses all agree.

At least until the next time we go all in pounding the table on the next things going to the moon. Rinse. Repeat. And evolve.

At the time of publication, DePorre had no position in any security mentioned.