Beware False Prophets

I can't help but laugh at the irony emerging from this GameStop (GME) mania. While one hedge fund went under, multiple others scored gains of nine and 10 figures. The initial analyst, who did a great job I should add in establishing his fundamental thesis, is an industry veteran with a fairly strong financial background. Robinhood, the self-anointed leader of the little guy, is being blamed for ruining the little guy.

And then the granddaddy of them all: the suits.

I'm not sure what defines "suits" as it seems to be extremely subjective, but I believe we're talking about one-percenters, hedge fund managers, and some folks we see on CNBC. But none of the GameStop bulls gave it a second thought when Mark Cuban, Jordan Belfort, Chamath Palihapitiya, or Elon Musk jumped on the side of buying. Dave Portnoy joined as well but I don't think anyone would label him a suit.

While those folks were vocal in their "support", it's easy to conclude they weren't alone. There were plenty of suits and one-percenters that profited on the move higher. And the ones that were vocal were doing so to elevate their social status among the "little guy".

And now we have Elon Musk tweeting out about Dogecoin a second time. Why? If he's the genius everyone claims him to be why would he tweet about a cryptocurrency that was created as a joke and has unlimited supply? There are only two reasons: He wants to be part of the "cool" crowd, and he enjoys watching people react to his tweets, not caring if they get financially hurt or not.

We criticize and want to crucify those with power making the game unfair, and we do so in a way that passes power to another group of one-percenters that are using the newfound support and power for selfish means.

What this means for traders is you need to be careful before blindly following even "smart" people into any idea. Figure out what they're selling, since we're all selling something. Like why was Chamath buying GME calls and posting on Twitter or why was Mark Cuban going back and forth with Kenny Polcari yesterday with Cuban essentially defending GameStop? Why is Elon Musk tweeting about Dogecoin?

And if you can't figure out what they're selling, then it is probably best to ignore it.

This mania won't die with a whimper like we've seen over the past few days, but now you have some experience what it looks like and how folks act, even the "suits," so you'll be ready next time.

At the time of publication, Timothy Collins was Long GME put combinations.