Here's a hard one: Imagine you're a senior executive at Morgan Stanley and your retail trading platform, E*Trade, is having a fine quarter, and suddenly the king of the meme stocks—Roaring Kitty, a.k.a. Keith Gill—turns up after a three-year absence. His return will mean a big surge in revenue thanks to the trading volume that Gill and his groupies will bring, but also potential headaches in the form of bad press and scrutiny from regulators. What do you do? Do you boot Roaring Kitty from E*Trade, or just look on as he sets off a series of buying frenzies in GameStop and God knows what else?
This is no imaginary scenario. On Monday, the Wall Street Journal reported that execs are fretting about the considerable sway Roaring Kitty and his followers can have on the market: "At E*Trade and its owner Morgan Stanley, that power created concerns he can pump up a stock for his own benefit. Their debate includes whether his actions amounted to manipulation and whether or not the firm is willing to risk drawing the attention of his meme army by removing him."
If you're not familiar with the back story, Gill is a former analyst at Mass Mutual who remade himself in 2020 as a YouTube and Reddit personality in order to pump the hell out of floundering retailer GameStop, which was then the most shorted stock on the street. He posted screenshots of his GameStop holdings to social media while making the case the shares were undervalued. This touched off a surreal battle between Roaring Kitty and Wall Street, which ended with Gill and his followers wiping out some of the country's biggest hedge funds. In 2023, the episode became the subject of the pretty-good-to-watch-on-a-plane movie Dumb Money.
While this a newsletter about crypto, I bring up Roaring Kitty's stock trading because so much of it—from the social media pumping to retail investors jumping in with no regard to fundamentals—resembles what has gone on for years with digital tokens, especially memecoins. Is there really that much difference from buying shares of GameStop, which is up over 100% from a week ago, and plowing your money into Dogecoin or Pepe or whatever?
Any of these choices strike me as a very bad idea compared to investing in a low-cost index fund, and I despair at the thought of young people plowing their meager savings into GME or DOGE. But I also accept that this is a country where it's legal for people to do all sorts of foolish things with their money, like playing slot machines or betting on the Mets. And as Nathaniel Popper's soon-to-be-published Trolls of Wall Street (Fortune will have a review soon) points out, many of those who first came to the stock market to follow the likes of Roaring Kitty stuck around and got more astute over time. Even when bets went sour, most novice investors set themselves up to build wealth.
Finally, the reality is that Morgan Stanley can boot Roaring Kitty, but in this age of meme investing, people will just latch onto another charismatic personality. For better or worse, there is no going back.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
