2022-12-14

Matt Levine is worth reading for the laughs

This is called a “pump-and-dump.” I don’t know why people keep falling for it? I guess the pictures of the Ferraris. Also a desire for investing to be easy, for it to be a trick that you can learn from some clever insiders on a Discord. If I tell you “buying stock is about allocating capital to productive businesses and sharing, over the long term, in the value they create for society,” and some guy standing next to a Ferrari on Twitter says “buying stocks is about interpreting mysterious signals that tell you THIS STOCK WILL GO UP 200% THIS AFTERNOON,” his theory sounds more fun, and it certainly sounds like it will make you more money more quickly than my theory. It will make him more money more quickly. Like, the guy is a successful day trader. It’s just that his secret is tricking you.

I say “you,” but I doubt anyone reading this column is actually getting tricked. This whole online subculture — people who go on Twitter and Discord so they can be tricked by pump-and-dump scammers — is quite large and very hard for me to understand. My assumption is that a lot of them think they are wise to the scam. If some pump-and-dump scammer pumps a stock, and you buy it a second after he pumps it and sell it a second before he dumps it, you can make money alongside him. You are knowingly playing hot potato; you are trying to follow his lead to take advantage of his other victims. Perhaps this will work, or perhaps it won’t and you’ll end up a victim too, but maybe it beats having a real job.