If you need any more proof that the “stonks” effect is real, look no further than a chart of Costco’s stock price over the past week. You’ll notice a steep cliff that begins with the market open at 9:30 a.m. on May 18th, when shares were trading unexpectedly lower at $460, down $30 from close the day before. The plunge continued throughout the afternoon, ultimately landing Costco below $430 — down 13 percent of its value. Which it’s yet to recover.
What caused the crash? A well-timed tweet from Twitter troll @JohnWRichKid, who disguised his account as a newswire service on the morning of May 18th to seed the fake news that Costco planned to raise the price of their fabled hot dogs by $1 due to inflation. For context, their food court hasn’t raised the price of the quarter-pound hot dog and 20-ounce drink combo — just $1.50 — since the 1980s, and the co-founder and former CEO of Costco once told the current chief executive that he would kill him if he raised the price. So yeah, people feel strongly about it.
The misleading tweet from @JohnWRichKid worked as intended, causing panic among loyal shoppers as it was spread by a number of verified accounts. Market analysts fell for it, but so did a number of conservatives eager to blame the end of the iconic deal on President Biden. The account for the House Republicans shared the post with the comment “#Bidenflation comes for everything,” and a day later, they’ve yet to scrub the error from their feed. The meme-happy retail investors associated with Reddit’s r/wallstreetbets once again celebrated their influence.
If there’s a lesson here beyond “double-check your source, especially on Twitter,” it must be that our financial instincts are rooted in direct experience. We groan at the gas pump when we see how much more it costs to fill the tank (every “Let’s Go Brandon” right-winger harps on this particular burden) while celebrating the noble AriZona Iced Tea for their commitment to 99-cent cans, and the very notion of Costco charging $2.50 for a hot dog and soda feels cataclysmic. In that light, it makes perfect sense for @HouseGOP to leave their mistaken tweet up, since the actual price of the deal is unimportant compared to the threat of your favorite supermarket indulgence getting slightly more expensive. Could it be that Costco’s stock has yet to rebound because this fear — while baseless — is too strong to shake off once it takes hold?
I’m no psychologist, but it looks like we’re most disposed to judge the health of the economy by the gap between what a familiar product costs and the amount we believe it should cost. The more stable the price, the better we remember it, and the more agitated we are by a perceived change. As ever in the brave new world of the stonk market, it all comes down to the vibes.