The Gamification of the Stock Market, Rocket Companies & Boeing

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Another look at the Reddit Rebellion and some insight into Rocket Companies and Boeing

The Gamification of the Stock Market, Rocket Companies & Boeing

01/29/2021

Podcast Transcript


Jeffrey again with another edition of Stock Smart, the January 29th 2021 edition for Friday. Hope you’re doing well. Again, we have to start with it. The Robinhood trade is back in effect. And Robinhood now is allowing their users to purchase the stock of GameStop and AMC and if you’ve been watching the stock over night, you can see that GameStop again has bounced up on buying. What’s kind of interesting is there were reports that after that potentially insiders had shared the information with a big short seller of GameStop and that short-seller doubled up his short position the day that Robinhood didn’t allow trading so that short seller then proceeded to get pounded in the after hours yesterday as the stock went up another 100% It’s currently sitting at about 330, which is up 70% for the day.

[00:01:01]
So there’s still a lot of pain going on in the Robinhood short squeeze with GameStop. So that’s pretty interesting, wanted to go over, it’s kind of funny, you know, I was thinking about this and you know the hedge funds now because they have to cover, they’ve had to cover all those short position losses you’ll see and it could have impacted a lot of these earnings of companies like, you know, Tesla, Apple, Microsoft who’ve gone down at Facebook, who’ve gone down after earnings, so you could have selling in those because those names have made a lot of money over the last year and you could have, that could be the reason why some of these positions have fallen over the last few days after really strong earnings, especially Microsoft Apple and Facebook.

[00:01:47]
So you could have, that could be one reason why the market is kind of getting crushed a little bit and then the other thing is and this is real, you know, these hedge funds which is a big, there’s a big amount invested, when you think about these hedge funds, you know, they’re investing like institutional money. Like I’m talking about like schools like endowments for like huge universities. I mean a lot of hedge funds are managing teachers’ pension money. They’re managing these huge pools of money just massive amounts of money. And so you’re getting redemptions. I’m sure there’s redemptions. So that’s another reason to probably be beware because these companies and the money is going to come back but if these guys, if these institutions that are investing in these hedge funds are really unhappy

[00:02:31]
I’m sure right now, they’re pulling their money out. And so they’re telling them we need to redeem X and Y and Z and we’re taking our money out of here and you’re going to see that in the fall of the market. I don’t know if you remember a couple years back. We had a really bad December and that was, largely had to do with hedge fund redemptions and that usually happens at the end of the year, but I think in this instance with this massive and you know with this massive correction and these massive losses, these redemptions, other hedge funds are pretty restrictive about how they let you take your money out. I’m sure there’s a lot of people saying look I don’t care.

[00:03:11]
I’m going to sue you and we want our money out. So you could see a lot of turbulence down the market today is another down day. We’re down about 2% in the S&P 500, 2 in the Dow and 2 in the NASDAQ and those could be, those could be impacted by those hedge fund redemptions. So it may be time to be a little bit careful with your investments and raise some cash. On to another topic that I think is kind of funny because you’ll hear some commentary about the gamification of the stock market and I say that’s a funny thing because this is sort of an adult version of a game right?

[00:03:49]
I mean trying to figure out how to win trying to figure out a little bit of information more than someone else doesn’t have that’s what this is. But when Wall Street loses, when these big hedge funds lose, you’ll hear these comments like the gamification of the stock market and it’s like yeah only when you lose, its sort of like, it reminds me of like when the NFL players when they go to renegotiate their contracts and they’re like with the general manager and they say hey when I’m playing, you call it a game, but when I come in for my money, you call it a business, it’s sort of like that doublespeak.

STOCK WATCH

So hey stock where I’m looking at is Rocket Mortgage. I saw one of the owners on CNBC today. One of the things that’s compelling to me is when you find out that an owner is the majority shareholder.

[00:04:36]
So where they’re holding massive positions, that’s an intriguing stock to me and when the Rocket Mortgage owner was on they were talking about how they own between the two owners they own something like 97% of the company. So that’s a great incentive to me if I’m an investor I’m looking for when the owners are still really involved in companies and when they’re really they’re still invested that means they’re building, and I like Rocket Mortgage. Rocket Mortgage was higher earlier this year. It’s had a 52 week high of about 34, it sits in a range of around $21 now and if you look at the chart like from a technical analyst perspective, it’s got a lot of support in the 20-21 range. So buying it here.

[00:05:21]
You’re pretty safe, you know, it does have a short position it’s about 30% short right now. So if we do get some positive momentum, you could get some shorts vacating. Which could bump it a little bit, you know higher but it’s a good business because you think about this, this is a mortgage, they’re writing mortgages, right? So they’re essentially going to be, what’s going on is going to be based on interest rates and interest rates are low, they’re staying low for at least the short-term and the near-term and I think people are going to refinance more especially after this Covid because a lot of people are doing these forbearances on their mortgages.

[00:06:04]
And so what you’re going to have is some of the companies will forgive it and attach the money that’s accrued to the end of the mortgage depending on your equity, but some of them are going to be like, hey, we need you to catch up on your mortgage and that’s going to force a lot of people in to refinancing and so Rocket Mortgage or Rocky Companies. That’s a company that definitely stands to benefit with the increase in mortgage applications. So I like this company. I think the technicals are very good. I think that it’s got a lot of support in the in the 20-21-22 range and it’s sitting at a 21 right now. I also like that their ownership is so strong that still privately mostly held by the original founders of the company.

[00:06:46]
And so that’s a stock that I think I don’t think you’re going to get hurt a lot if you sit in that for a while and I would look at it as an investment

THE AVERAGE INVESTOR

So I have a question from Jen that I received via email. And Jen wants to know what I think of Boeing. You know, I’ve been in it, up and down and around I’m going, last year, I put it, listed it as one of the stocks to buy as a big idea. It didn’t turn out to be a big idea. Turned out to be a bust Boeing has so many searches on Google if you go up and look at how many times Boeing is searched, it’s searched a lot and it’s always for the wrong thing.

[00:07:25]
It’s always they’re doing something wrong, something going on with Boeing and they’re having a problem with this they’re burning cash flow like that and it’s not good and Boeing used to be this cash cow Juggernaut. I mean 3 years back it was trading at $400 a share and it had tons of cash to burn. They’re just sitting on cash and now they’re burning cash like crazy. I mean they just had another really poor quarter. Where they burned about 5 billion in the last quarter that was in their recent earnings, and to me if you’re buying Boeing you’re going to have to hold your nose for about a year and just hold it and a position like that, you’re going to be unhappy a lot because it’s been very volatile.

[00:08:14]
And you also have this travel issue right? Maybe we’re going to start traveling in July or August but we don’t know yet. Now it’s in a good channel probably with support. It’s sitting in the 180-195 range. It’s got a lot of support there over the last like 6-8 months. So to me the lowest it’s probably not going any lower than the 170 range if there’s a drop so it’s got a lot of support when you can buy it, but it’s also making a very negative pattern when it hit 240. It’s been straight down. So from a technical reading on it when it hit like 237,238.

[00:08:49]
It’s been straight in a nosedive since and that’s been pretty much since mid-October, in December it hit the high that it’s hit in a while and then it’s been straight down since and with this earnings again, you’re getting more selling and we actually for my clients we’ve gotten rid of it for right now. It’s something that I want to watch and if you want to hold like a small position maybe 1-2 shares that’ll keep you kind of focused on the company. You’ll know. I mean like it’s still a great company the barriers to entry in the airline and airplane business are incredible.

[00:09:23]
They have very little competition, but they still are not headed in the right direction and all the news seems to be negative. So it’s just one of those stocks where you might want to cut your position to a really small amount and just watch it. And then as you see it, maybe you want a dollar cost average in and build the position so you won’t be hurt too much in the short-term because it’s still going to have a lot of bumps in the short-term. So hey, have a great weekend. See you then.

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