05 Sep Bonus Episode: Is this a Pump-and-Dump Economy?
Today is Labor Day in the US. It feels like we all need a break from the bizarre-o world we’ve been in lately.
A pump-and-dump scheme in the stock market is when a stock is artificially pumped up through promotion. The stock is sold while the price is high and then the buyers are left holding the bag once the price drops.
Does any of this sound familiar? *Gestures broadly* Does it not seem like that’s what’s happening, well, everywhere these days?
Links I mention in this episode:
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Transcription by Otter.ai. Please forgive any typos!
Welcome to the Causey Consulting Podcast. You can find us online anytime at CauseyConsultingLLC.com. And now, here’s your host, Sara Causey. Hello, Hello, and thanks for tuning in. Today is labor day in the United States. So I hope if you’re listening to this in the US, you are able to take the day off and have some rest and relaxation, it definitely feels like it is needed. On today’s bonus episode, I want to contemplate this question of a pump and dump scam. Are we in one, because it kind of seems like we are to me. Now I haven’t buried my thesis on saying that I think we are in a K shaped economy. We’re continually told that wealthy people are pretty much insulated from inflation. They’re still buying luxury goods and they’re just not too worried about the economy overall. Meanwhile, it seems like more people are getting squeezed out of the middle class and the working poor suffering. Last week, there was an article published on LinkedIn about people having to do buy now pay later financing for groceries. If that doesn’t scare the hell out of you, then I’m not exactly sure where you are. I don’t know what’s going on. If that doesn’t trouble you Never did I think I would see the day in first world America where people would have to finance things like a sandwich and go go read the article. It’s in there. It’s crazy to me. So is this a pump and dump scam? To me it feels like it is now okay, standard disclaimer standard boilerplate here. No, I am not an economist. I’m not a billionaire hedge fund manager for billionaires. I don’t sit on the web. I’m not a power broker. I’m also not an all seeing Oracle or psychic like from olden times. All I’m doing is giving you my opinion for your entertainment only not claiming to give you any kind of financial advice or to be an economic expert of any kind. I am not. So what is a pump and dump scam. If you’re wondering what a pump and dump scam is Investopedia offers us a very good definition. And I’ll read from their article now. A pump and dump scam is the illegal act of an investor or group of investors promoting a stock they hold and selling once the stock price has risen following the surge in interest as a result of their endorsement. Here we take a closer look at how pump and dump schemes work and how to avoid them. Under the key takeaways we find pump and dump is a scheme that attempts to boost the price of a stock through recommendations based on false misleading or greatly exaggerated statements. The favorite medium of communication for traders involved in pump and dump is social media platforms or anonymized messaging apps like telegram and discord. promoters of the scheme will then begin to coordinate rumors, misinformation or hype in order to artificially increase interest in the security driving up its price. Then, once the price of the stock has been increased sufficiently by unsuspecting marks, the promoter then sells the stock at high prices and quote, yeah, I mean, I know that they’re talking specifically about the stock market in this article, but does it not feel to anyone else like this is happening across the board, not just with investments, but like, gestures broadly? Every everything? I feel like that has happened in the housing market. When I think back to the FOMO, and some of the sheer insanity that took place last year, particularly last summer, it was nuts. People waving home inspections, sellers trying to sell burned out house trailers on a few acres for half a million dollars. Problematic lemon houses going for top dollar Realtors acting like well, if you’re a buyer, then you’re automatically a POS, if you don’t show up to the house, you could come out here to the open house with a bouquet of roses a steak dinner and 200 grand over asking price if you even want to have a chance. Then you had artificially manipulated in my opinion, super low interest rates to try to further stir up that FOMO now you have most homebuyers saying that they feel a sense of regret they have buyer’s remorse if they got into the market earlier this year or last year, and a lot of them are talking about how unfortunately they did buy lemon houses. So I think the housing market in my opinion falls into this pump and dump. Now I also believe that based on what in my opinion are bogus is unemployment numbers and this just absolutely stuffed down our throat narrative of labor shortage, labor shortage to open jobs for everyone unemployed person? Oh, oh, well, what kind of jobs are they? As I’ve said before, do a lot of these jobs even pay a living wage? Are some of these jobs just a sign in the window that went up during the PPP loans and the sign never came down? But yet nobody ever seems to be hired for said job. Like Seinfeld, who are these people? Where are these jobs? And what are these jobs? And what are they paying? To me? It feels like a pump and dump. Look over here at these shiny objects. Whoa Hypebeast let’s all get excited about the housing market. Oh, let’s all get excited about the labor market and then it all comes crashing down. What is going to happen when we have to pay the piper on this because it will be the taxpayer that has to pay the piper will not mark my words. If you if you enjoy my bold statements and bold predictions, here you go, you can write it down. It will not be the corporate fat cats it will not be the Wall Street High Rollers it will be as it always is the American taxpayer that has to suffer for this. Now we’ll read a little bit more from Investopedia. The basics of a pump and dump. Pump and dump schemes were traditionally done through cold calling. But with the advent of the Internet, this illegal practice has become even more prevalent. Fraudsters post messages online enticing investors to buy a stock quickly, with claims to have inside information that some development will lead to an upswing in the shares price. Once buyers jump in the perpetrators sell their shares, causing the price to drop dramatically. new investors then lose their money. These games usually target micro and small cap stocks as they are easiest to manipulate. Due to the small float of these types of stocks. It does not take a lot of new buyers to push a stock higher and quote, if you scroll down under the heading the bottom line you find always keep this investment caveat in mind. If it’s too good to be true, it probably is. If someone you don’t know gives you a stock tip, stop and think about why they would be so willing to give you such information. Do not think you can make a large and quick investment return because it’s unlikely to happen. It’s also vital that you do your own research about any investment. This should help you avoid being duped by such pump and dump scams and quote, yeah, but I mean what happens if the pump and dump is on a large scale? What happens day after day, month after month, quarter after quarter? All you hear is labor shortage. People are doing great. But then on the other hand, you’re being told that pawn shops are busier than ever with people trying to pawn not people coming into shop but people trying to pawn items they never thought they would and that people are having to do buy now pay later financing for their groceries. defaults on auto loans are going up. Most homebuyers regret if they bought last year earlier this year. What are you supposed to do with all of this conflicting information? Not just long pause because I’m also doing this over myself. What where are we supposed to go from here? I’m just curious. Does this not feel to anyone else like a K shaped economy? Does this not feel to anyone else like a giant pump and dump? We’re gonna pump you up we’re gonna make you feel good. We’re gonna tell you that the labor market is still hot and dammit it can handle however many more rate increases the Fed wants to come up with we are doing great. Fewer people are living paycheck to paycheck. Now there’s only been a reported drop of like 2% but ignore that just focus on that main headline that fewer people supposedly are living paycheck to paycheck and they’re doing great inflation is easing. Hmm, is it? Have you noticed that at home do you feel like in your personal micro economy inflation has eased? Does it seem like if maybe you’re paying 20 or 30 cents per gallon less on gasoline than you were a few months ago has that really helped your bottom line. heating costs are supposed to go through the roof no pun intended for homeowners this coming winter and we’re also set in most of the US to have a harsh winter. In my area of the Midwest, the Almanac is calling for blizzards and snow squalls in certain parts of the year. Natural gas is not going to be cheap. Propane is not going to be cheap. If your house is all electric, you already know that that’s not going to be cheap. But hey, gas is down a couple of dimes a gallon so I guess we’re all just supposed to celebrate that. Does your household economy feel like inflation has eased? If you’ve been living paycheck to paycheck? Have you suddenly made a quantum leap above that here in the past two or three weeks? Does this feel like it may be some exam graduated media hokum to you. In my opinion, it seems to be not advice, I can’t tell you what to do. The most I will say is that using good judgment and critical thinking typically will not steer you in the wrong direction. In the meantime, I do hope that wherever you are in the US today, for those of you who are American listeners, you’re able to have the day off and rest. For those of you around the globe, the message is the same. Get some rest and relaxation where you can stay safe. stay sane, and I’ll see you in the next episode. We hope you enjoyed today’s episode. If you haven’t already, please take a quick second to subscribe to this podcast and share it with your friends. Thanks for tuning in. We’ll see you next time.