Gamestop (GME), CCIV, XLF and Market Cap Vs Equal Weight Indexing

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Gamestop (GME), CCIV, XLF and Market Cap Vs Equal Weight Indexing


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Hey, this is Jeffrey with another edition of Stock Smart, February 25th, 2021 edition. Hope you’re all doing well. Thanks again for listening to the show. So GameStop back in play. GME cruising up big-time yesterday. It’s up to 138.61, up 50.79% today, you know the shorts in this are not that great. They may be 35-40% short at this point. That’s not a huge short that should move the stock as much as it’s moved. So something’s different. You know, they had a catalyst yesterday as the CFO got fired, you know, the new guy who’s from Chewy they perhaps believe now they can turn it around a little bit better. So did have a positive catalyst in a way, told you on Monday that Keith Gill who is the famed Reddit trade bought 50,000 shares of the stock.

So he’s done very well and that was when it was at 35-40 so we know it’s back in play, but we’re not seeing kind of the information on the Reddit bulletin boards that we see about organizing people and getting everyone to be involved so it’s a little more interesting, a little more secretive this time. But GameStop is in play. I would tell you that my kids who are both studying for the financial services industry now, both of them.

They bought a GameStop option, a call option long-dated and they bought it about a week ago and let’s see, it was in April 16th, 600 call meaning the stock would be in the money when Gamestop went to 600, but the point is you can make money on out-of-the-money calls if they’re long-dated and the stock moves in a positive direction so they don’t have to be in the money as long as they have more time to get in the money. So essentially this call went up yesterday the call went up 900% in value so the call price when my kids bought it was about a dollar twenty or $120 for the hundred share equivalent of the call purchase. By the afternoon yesterday, it was 11-1200 in value, total overall, or about $11-12 to get rid of it

or to sell it and that was the bid on it. So I told the kids this morning get up and get it sold because I don’t see that there’s a long-term catalyst in the stock and just like if any of my listeners ask me I would say, you know, I wouldn’t be a buyer right now. I would definitely stay away from it as far as you can but the kids sold it, they made a nice profit on it, sold it around $11 for the call. There’s a huge spread between the bid and the ask price. So a lot of times when people say I bought these calls, I made a lot of money, realize on the other end,

There’s a market maker who understands what’s going on here and isn’t going to give you the price that you should normally get. Or you normally get for a regular stock in play because I’ll tell you the bid price was something like eleven, the ask price was like 26, so that is a massive massive spread on that call and that’s because people realize you know, hey, we don’t know where it’s going. It’s so volatile, the movement, if you’re if we’re going to be in it, we’re not giving you what you want on this on this option. So anyway, that’s what I want to start with so podcast is growing in terms of downloads. Thanks again. We’re about 10% per week over the last week of growth, which is amazing. So thank you so much.

Again, we’re going to have a huge announcement on this podcast and something that’s new and brewing and I’ll tell more, I’ll share more with you on that in the coming weeks. So CCIV, you know, the SPAC that bought Lucid Motors, stock was down pretty heavily yesterday. Today it’s making a little bit of a bid up to around 29.78, up about 4%, company has value at 37. There is so much shell shock right now with the news here on this. Investors got screwed because insiders bought it for 15 that the stocks reeling a little bit. It’s going to take some of that stench to go away before people get involved. I do see value here. I’m not necessarily going to buy it for clients, but I do see value here under 35, 33, 34. There’s some value here. So if you’re interested in the company, another electric vehicle play, CCIV.

So, Charlie Munger came out yesterday and he’s a famed investor and friend of Warren Buffett. He also was a client of mine at one point, he’s a famous attorney with a firm called Munger Tolles & Olson probably one of the most prestigious law firms in the country, always in the AM Law top 5 or 10, so Munger on SPACs which Churchill Capital is, again SPACs are blank check companies that raise money in an initial public offering at about $10 per share and people buy the SPAC, pushing up the value of the SPAC without knowing what company that they may be invested in so it’s kind of garbage. Munger said, you know, and investment bankers will sell shit as long as shit can be sold.

So let’s see the VIX is rising again as the market continues to kind of unwind. VIX is up 12% today to around 24. S&P 500 down 66 basis points. And again, we’re going to start seeing this. I think the corrections coming, we’re going to have a little bit of a correction here, maybe 5% when we’re getting out of earnings.


Let’s take a look at a stock not exactly a stock, but an ETF. And here’s the marketing language, this ETF one of the power house spider products, provides exposure to an index that includes companies from the following Industries: diversified financial services, insurance, commercial banks, capital markets, real estate investment trust, thrift and mortgage finance, consumer finance, real estate management development. It is the XLF, the XLF financial spider, contains the who’s who essentially of the financial players in the domestic economy here.

I’m a believer in anything bank-related right now, especially because interest rates as inflation creeps, we’re going to creep in interest rates and that’s how banks make their money, they make their money in the spread and the spread is the you know, what they charge for a loan and what they pay for the loan and so as that continues to rise that spread gets greater and greater banks will continue to do well and so, big believer in the XLF. The chart is a tremendous chart. It’s up about 13.8% this year already.

And we’re only 8 weeks in trading this year so the stock technical on the stock or I should say on the ETF are just tremendous, really has a great movement, great pattern all the way back to last year and so again XLF.


So I got a question from Robyn and Robyn wants to know, and we talked a little bit about this yesterday, about the market cap weight and equal weight and maybe Robyn kind of heard that and she wanted to know a little bit more. She wanted to know the difference between an equal-weight ETF and a market cap ETF. Think of like the S&P 500 think of it as a pie chart with the market-weight ETF essentially the pie chart is broken up in the slices based on the size of the market cap. So you might have Tesla as having a huge piece of that pie.

And then you may have another company like Dow that’s smaller, and Amazon has another huge piece and then McDonald’s is smaller. So that’s what it is. So that ETF, that’s market-cap-weighted is basing it based on the market cap weight of the company. Now when you’re in an ETF that’s equal weight, every company gets the exact same slice of the pie. Now generally because those growth stocks, which are 28% of the S&P 500 of a market-weighted ETF like an SPY. 28% of that is in 10 companies, you know, we all know them, Apple, Microsoft, Amazon, Facebook, Tesla, Google. Okay, we know those are listed 6 or 7, but there’s 10 of them and they essentially make up 28% so you can see that’s kind of a disparity. In an equal weighted index again, all 500 companies have the same weight in the index so you can see right now.

There’s an interesting divergence and this doesn’t generally happen if you look at a chart, so if you just lay the SPY and the RSP over each other and the RSP is essentially the equal-weight S&P 500, where the SPY is the market cap weighted S&P 500 index. So if you lay that over on top of each other you’ll notice that generally the SPY which is the market cap weight, because those in the last 10 years, especially those heavy hitting big-time stocks that were 28% of market cap-weighted ETF have really outperformed and done well. So in general the SPY has out-performed but not this year. Look at it this year. Year to date, the RSP is nearly double with the SPY.

in performance. So the RSP, which is the equal-weighted S&P 500 index essentially is up about 7.8 or 8% where the SPY is only up 4%. What does that tell you? And you can see it if you look at each individual stock, those stocks like Apple, Amazon, Facebook. They’re not performing that well right now. And really what that can be attributed to, is energy has done really well in the last two months and you’ll see the financials have done extremely well, so again, hey, thanks for the questions. Keep them coming. And we’ll see you next time on Stock Smart.

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