MarketWatch: "GameStop saga’s real lesson: ‘Don’t short troubled companies at the start of an economic cycle’"

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MarketWatch: "GameStop saga’s real lesson: ‘Don’t short troubled companies at the start of an economic cycle’"

Excerpt from MarketWatch quoting DataTrek’s Nick Colas:

…. “The battle between day traders and short sellers over GameStop that’s blotting out everything else on Wall Street this week offers up an important but much more lasting and practical lesson for investors, according to Nicholas Colas, co-founder of DataTrek Research.

Here’s the lesson: “Don’t short troubled companies at the start of an economic cycle.”

In a Thursday note, Colas recalled that, as the firm had flagged in December, holiday retail spending and Google search interest in GameStop, the videgame retailer, did not look horrible.

“‘Not horrible’ is good enough when capital markets are rallying due to optimism over the future,” Colas said. And that’s what stocks were doing as they extended the rebound from the early 2020 pandemic selloff to push further into record territory in the new year, buoyed by continued optimism over COVID-19 vaccine rollouts”….

Read the full article here on MarketWatch!