Opinion: I Want To Bet Against AMC In The Long Term; But Short Term, I'm In.

The following originally appeared on Capital Watch

I missed the boat on the GameStop Corp. GME and AMC Entertainment Holdings Inc AMC reddit stock rally; or rather, I didn’t hop on board in time to take a chance navigating such stormy seas. Since then, it seems that capriciousness has become a more useful attribute than coolheadedness when it comes to investing.

This year, I have learned this lesson to some degree. I’ve been on the Bitcoin bandwagon since 2020 and I’ve added a slew of silly cryptos to my wallet. But I have yet to join the meme stock revolution, except for a bet against AMC in the form of a put option as the first battle of this strange stock-focused populist revolution winded down; I made about 40% on the option but didn’t gamble with too much dough. I felt bad about it, too, as if my option play was tantamount to treason, a vote in favor of the powerful at the expense of the people. Of course, none of this really makes sense, but in a world in which the political has invaded every aspect of our lives, political activism through propping up failing, overvalued companies in the form of a short-squeeze is par for the course.

Last time, I underestimated the power of WallStreetBets, the Reddit forum that pushed GameStop and AMC to outrageous heights. And while it would be unwise to do likewise this time around (CNBC’s Jim Cramer basically told his audience you’d have to be nuts to bet against meme stocks right now), I am going to do just that. For, this time around, as these stocks skyrocket, I do not hear the populist rallying cry of the recent past; indeed, the music of this next phase of the meme stock revolution sounds less like Les Misérables’s “One Day More” and more like Madonna’s “Material Girl.” Do I hear the people sing? Yes, but this time there are fewer people, and they are singing a different tune—and the show, at some point, must end. And while Chewy.com’s Ryan Cohen might actually reinvent GameStop to justify its valuation (at some distant point in the future), AMC’s chances of any kind of valuation justification are even grimmer.

If the most recent phase of the meme stock revolution was the Moderate Phase—when everyday persons jumped in the fray to trade stocks for the first time, swept up by their disenchantment with the powers that be and sincerely motivated by The Rights of Man—this next phase might be called the Radical Phase, taking yet another page from the French Revolution. In the French case, this led to the Reign of Terror, when blood from the guillotine flooded the streets of Paris.

Now, while the WallStreetBets crew is a far cry (in every way) from the Jacobins, it does seem to be igniting passions amongst the trading public at the expense of rationality. If the analogy is right, then the next phase of the meme stock revolution will be the Conservative Phase, a period in which the public reacts to the chaotic terror of the Radical Phase. I am betting we enter this phase sometime by the fall, which is why I bought puts expiring on Sept. 17 for AMC at a breakeven price of $18. (I also made a contradictory move and bought 200 shares with a stop loss in hopes of a big breakout after this morning’s big run-up and midday fall to around $25 per share). So far, so good.

There is no rush, of course, as this current phase might move these stocks up even further; a key resistance price is over $20 per share, after which if it holds, $45 per share might be imminent. But watch it carefully because, inevitably, it will fall. AMC is worth no more than $15 per share based on any sane valuation and, when people get bored or make enough money or if some semblance of sanity reemerges, it will be reflected in the stock price.

The markets have changed fundamentally this year in the sense that fundamentals mean nothing, while momentum and crowdsourcing mean everything. But, as we have seen, when it comes to a stock like AMC, the revolution comes in fits and starts, unfolding in various phases.

What happens after the Conservative Phase, when you can bet against AMC? Well, if the French example holds, we should enter the Napoleonic Phase, an era in which one man with absolute power runs the show and upon whose whims the stock market is beholden.

Wait a minute. We already have that guy: You can call him Mr. Musk, but he prefers “Elon the Equity Emperor.”