Bonds Get a Meme Moment as Reddit Crowd Drifts Over From Stocks

James McHugh isn’t afraid of a little risk. The trouble this year has been knowing where to find it. Crypto burned him. Meme stocks are stuck in the pits. So McHugh, a 36-year-old who works in Houston’s oil and gas industry, has been getting his fix in a corner of the market retail investors typically overlook — junk debt.

His target is Bed Bath & Beyond Inc., a company the WallStreetBets crowd cornered at the height of last year’s retail mania for stocks. He recently picked up a “gambling amount” of the struggling retailer’s bonds, some maturing as far off as 12 years from now. Those were 17 cents on the dollar. That discount promises a gigantic return — if Bed Bath & Beyond can last until 2034.

McHugh moderates r/bonds, the Reddit forum where retail traders come to swap tips and research on debt. He’s seen traffic this year skyrocket. Twitter users post snarkily about their returns versus crypto. And on YouTube, presenters promise everyday bond buyers can get rich fast — and, because these are bonds, in some cases more slowly — if only they can master credit ratings and coupon rates.

Call it the age of the meme bond.

“Bonds were something your grandma gave you,” McHugh said. “I just don’t think people know that you can be a degenerate bond gambler.”

The Bed Bath & Beyond bet is the same one many hedge funds make when they invest in the bonds of distressed companies. Buy at a discount now and hope to get paid back in full later. That is, if the company doesn’t go bust in between, in which case they’ll fight it out in bankruptcy court.

But these are regular people. And they’re congregating in the same places where meme-stock traders boast about their diamond hands and cheer unlikely protagonists like GameStop Corp. and AMC Entertainment Holdings Inc. Last year, they learned how much power they had, sending the stocks of struggling companies surging by 10-fold or more, and creating short-squeezes so epic that they destroyed Gabe Plotkin’s $7.8 billion hedge fund, Melvin Capital Management.