Jim Cramer breaks down the GameStop short squeeze

Headline-grabbing short squeezes involving GameStop — and to a lesser extent, a few other companies — are really distractions for most stock market investors, CNBC’s Jim Cramer said Monday.

“As entertaining as these moves are, this stuff is ultimately a sideshow. At the end of the day, I don’t think a Reddit forum can bring the house down,” the “Mad Money” host said, referring r/wallstreetbets and other online chat rooms where some retail investors and day traders have sought to drive shares higher and squeeze out short-sellers.

In other cases, it’s less about busting short-sellers and targeting companies that are “genuinely loved” such as Blackberry and Palantir, both of which had big runs during Monday’s session, Cramer said. Blackberry closed higher by about 28% while Palantir advanced 11%.

“They’re picking undervalued stocks that have a big short position and running with them,” Cramer said. “That can cause crazy moves in a handful of stocks, but it’s not big enough to move the entire market.”

While it may be causing financial pain for hedge funds and other investors who had shorted the stocks, essentially betting shares will go lower, Cramer said the recent developments in are not what most investors should be focusing on.

“What really matters right now is that we have a stock picker’s market for the first time in 20-odd years,” Cramer said. “This is a market that rewards individual companies for being well-run, and that means stocks are less sensitive to the broader economy than they used to be.”

To be sure, Cramer said there are some stocks that could hurt the market overall if large numbers of investors decide to sell and take profits after massive runs during the coronavirus pandemic. He also acknowledged that while technology companies have been major beneficiaries of the digital acceleration spurred on by the pandemic, most of the sector has “gotten overheated at these levels.”

“The endless price target boosts for the semiconductors and for Apple are very unnerving to me,” Cramer said. “They set a high bar. That could hurt the market. There’s a whole gauntlet of stocks that have roared, from Microsoft to Tesla to Boeing to AMD, and they could really hurt us if they get hit with a big bout of profit-taking.”

At the same time, Cramer said there are signs in the market that are encouraging for investors. For example, when a company such as Kimberly-Clark reported a positive quarter, the stock moves higher, Cramer said.

“Of course, stocks go down just as much when they disappoint and that’s what happened to IBM last week,” Cramer said, leaning on these examples as evidence of what he believes is a stock-pickers market.

That’s especially important for investors to remember during a busy week of earnings, Cramer said, which includes the likes of Apple, Tesla and Johnson & Johnson issuing quarterly reports.

“With the exception of a handful of gigantic tech plays, there isn’t a stock out there that’s big enough to bring down this market,” Cramer said. “If anything, the gauntlet of earnings this week starting with J&J tomorrow, which is not at all sensitive to the economy, could be a terrific sign that many big-cap stocks are immune to a slowdown and unperturbed by the crazy action in marginal names like a GameStop or B&G Foods or even a [Rocket Companies] and Bed Bath & Beyond.”

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[tbagind]

"I'm not going to give any advice to the wallstreetbets reddit crowd because they are already making a lot money" haha

[chrisbentsen]

Nothing better than seeing the shorts get burned.

[migz]

IMAGINE A BILLIONAIRE GETTING BANKRUPT BY A MEME 😂😂😂

[TRedAngel]

"It's not about the money. It's about sending a message."

[Dyldayas]

why do merchants get so scared when their tactics are used against them?

[ExceptionalPleb]

"We can stay irrational longer than you can stay liquid"

#WeLikeTheStonk

[hudsonsshittyvideos]

"But this wont move the entire market"
* Entire Market Moves *

[theclimbto]

Basically Jim just said "50% more Stock than existed, was shorted".

LMAO, they DESERVE to lose their asses off.

[shockcityrocker]

The intro: “I’m here to level the playing field for investors”. So is naked shorting 140% of the float “leveling the playing field”? Don’t blame anyone but yourselves with what happened with GameStop. You guys are pushing the narrative that a bunch of kids manipulated the system with nefarious intentions; whoa is you. Ya know how much sympathy I have for these guys that got caught with their pants down? Less than zero.

[itsme]

Oppsie, the billion dollar hudgefund guys are squirming! That's their fault for short selling stocks well beyond 100%. Time to pay the piper for their greed.

[Lightningkuriboh]

We live In a world where Jim Cramer covers WSB almost everyday. This is glorious.

[thetrouthunter]

I own no shares of GME, but I support those that “like the stock.”

[Idiodyssey]

Hedge fund managers: "Hey! You can't do that! Artificially manipulating stock prices is only ok when WE do it! Daddy government, make them stop!"

[PittsburghRecordingStudio]

“They couldn’t bring down the entire market was that a challenge 😂😂

[chanmanrings]

I don't agree with Jim on almost everything, but we have to give credit where credit is due. He's one of the only talking heads supporting the retail side.

[blancolirio]

This is what we turn to for an explanation....?

[PeterSedesse]

The Gamestop thing is not about people trying to make a profit, it is about bankrupting hedge funds who play games that cost thousands of jobs. It is about a ton of people ' donating ' money to crush the hedge funds and saving jobs.

[yurbaeyas]

Jim I don’t think you’d understand.. the squeeze hasn’t started yet

[slickdealer]

While Blackberry executives have no clue why they just became uber rich 🤔

[kevinhuerta-ponce]

GameStop pulling a 500 IQ move by staying quiet.