My son mentioned the phrase “hype train” in a text recently. What he is referring to is a swell of social media posts regarding a certain financial asset, e.g. bitcoin, dogecoin, Game Stop stock, etc. Honestly, I always discounted the social media impact on the price of equities. However, as I sit back and watch what has gone on with Game Stop, the proof is incontrovertible that through sheer social media collaboration the price of a stock could far outpace its intrinsic value based on its balance sheet, price-to-earnings multiple and cash flows. With enough social media interest the price of a stock can be affected. Then, with an outsized price move, the traditional media reports on it, until there is broad awareness among the population at large. Then, knowing they have influenced traditional institutions and the broader population, the people who are influencers on social media are emboldened to hype other financial assets as well. Today they seem to be hyping up Silver. Any financial asset that seems to be heavily shorted by institutions is a target right now.
Looking back I can see that the meteoric rise in Tesla stock and Bitcoin was influenced by the hype train. If you are someone who believes in fundamental analysis and are inclined to short a stock or commodity because the price has outpaced its intrinsic value, then watch out for the hype train. It can be a disaster for your brokerage account.