Retail Investors Continue To CRUSH Wall Street

0:00Hello, everyone. We've got a lot to discuss today. Retail investors are destroying hedge funds in the stock market. Male college grads are struggling to find jobs. The Federal Reserve remains under immense public pressure, and Eric Jackson explains to us why Opendoor may be the next GameStop mean stock. We are live today from the desk of Anthony Pompliano.

0:30Ladies and gentlemen, the stock market is evolving before our eyes, yet most people haven't realized yet just how important this evolution is going to be moving forward. We can start with the power law outcome of the MAG 7 stocks. Just look at this type of outperformance. It is pure dominance of the other 493 stocks in the S &P 500. Now, these seven stocks, Meta, Apple, Amazon, Alphabet, Microsoft, NVIDIA, and Tesla, they are probably seven of the greatest companies ever created in all of human history. They're able to use technology and capital to continue compounding their advantage, which allows them to pull away from the competition in an accelerated way.

1:06It's what that chart's showing us. But it seems like traditional Wall Street investors, they are still in disbelief here. They continue to wait for a big crash or some sort of material change in the market. Retail investors, however, they've taken a completely opposite approach. Retail's been pouring capital into the market, and they significantly outperformed the traditional players. Jim Bianco published a great chart showing the comparison between retail's favorite stocks and the top equity holdings of a group of hedge funds. Whenever this ratio is increasing, that means the retail index is beating the guru index.

1:38And as you can see from the graphic, retail is running circles around Wall Street for the last few months. Now, essentially, retail bought the dip and they believed the market would come flying back. Wall Street stayed on the sidelines and they continued to play defense. And Wall Street was wrong. As if that wasn't compelling enough, the fund managers are even telling the same story themselves. Ryan Dietrich highlights a recent Bank of America survey. Fund managers said in that survey that they were not taking higher than normal risk. They're just playing it normal. Now, these same fund managers told Bank of America that they are not overweight public equities right now either.

2:13Well, we keep seeing the S &P and Nasdaq hit all-time highs. So this fund doesn't come without risk. Take BTIG's Jonathan Krinsky, who recently wrote that the NASDAQ 100 has now gone 60 straight trading days without closing below its 20-day moving average. Second longest streak in history all the way back to 1985. The longest streak ended in early 1999. So where do we go from here? Well, nobody actually knows. But Wall Street continues to believe that this rally in stocks, it isn't real. They hate to see the market ripping in the opposite direction. Most of them were offsides, which is why you keep hearing the constant predictions of a big market crash being right around the corner.

2:52Retail, they're in a whole different mental state. They're cool, calm, collected, and moisturized. They went long when it was unpopular, and now they are reaping the benefits. My personal belief is that things in motion tend to stay in motion, and so I'd expect the stock market to do very well during the second half of the year. Add in a rate cut or two, which should have already happened, obviously, and you've got the ingredients for what you need for a crazy few months ahead. Did you know that it doesn't matter whether a young man went to college or not in terms of getting a job? Kind of crazy, right?

3:23Let me explain. My friend Boring Biz points out that male college grads are now just as likely to be unemployed as people who never went to college. Now that's for men. The same's not true for women. Women are much more likely to land a job once they graduate from college, which makes sense. But this brings us back to the eye-opening data around men. We're leaving these young men behind like never before. But when you dig into the data, you can see that this is actually due to the fact that college-educated men are not being employed at the same rate that they used to be. They're quite literally being left behind.

3:55This is a different story than if uneducated men were actually getting more jobs. So what we have is a story of degradation. The situation is getting worse rather than a story of growth, where you could say that people who didn't have the education were getting more jobs. At the end of the day, the data's telling us one thing. All those people who went into hundreds of thousands of dollars of debt to pay for college, they're no better off. The Federal Reserve has come under immense pressure in recent weeks. Regardless of what happens in that situation, there's a big question that remains right now.

4:27It's completely unanswered. How independent is the Fed at this exact moment? I asked Jordy Visser, a 30-year veteran on Wall Street, what he thought. Here's what he had to say. The reason we're in this situation, the reason this is such an important thing, is at the beginning of the year or at the end, you know, once the election was over, Scott Besson openly talked about the need to issue longer dated treasuries and get away from what Janet Yellen had done with having all of our debt be maturing in short duration treasuries. That was completely given up on. I mean, Besson spoke over the weekend and he basically said, we can't do that right now.

5:07And I think rather than say right now, I'm going to say they can't do it ever. and there's a very simple reason which is you know I reference Joseph Schumpeter a lot here I reference it on my own YouTube video and I talk about creative destruction and if you go through Schumpeter's work you end up in a situation where number one cannibalism or capitalism eventually cannibalizes itself like the biggest weakness to capitalism ends up being capitalism because you get a distribution of wealth inequality problem we've referenced how that is a scenario that's showing up in New York City when you go through socialism now entering politics in a much bigger way.

5:43Well, for the Fed, or for the administration, they have a debt of over 100 % GDP. They have a deficit of about$2 trillion, of which$1 trillion of it is interest expense. So they have a need to get rates down. And even if it means running inflation a little bit hot, maybe 3.5%, they've made the decision that that is a risk worth taking. And Donald Trump even said that they can always raise rates if they need to, but we need rates down. And I think there's an argument that you can make as to why that would be the case. Now, you're going to have to sacrifice inflation. But the bigger story here, which I think people just have to accept it, is Fed independence is completely in question now.

6:29And whether it's a shadow Fed committee, whether Powell's out or not, I think we've already kind of come to the conclusion that there's something going on here that's a bigger story. And I think Fed independence is either done now or it's done when the next Fed chair comes in. But in my opinion, it looks done. Now, it's pretty interesting to see Jordy with such unique views on the Fed's independence. Not many people would agree with him. It's quite a weird position we find ourselves in right now. But speaking of views, Treasury Secretary Scott Besant, he shared a very strong view on the Fed this morning on CNBC.

7:01Take a listen to what Besant had to say. What we need to do is examine the entire Federal Reserve institution and whether they have been successful. I'm speaking, actually, I'm going to be in the building this evening. There is a regulatory conference that begins tomorrow. I'm the keynote speaker tonight talking about regulation. The Fed as well deals with monetary policy, regulations, financial stability. And again, I think that we should think, has the organization succeeded in its mission? You know, if this were the FAA and we were having this many mistakes, we would go back and look at why why has this happened?

7:53I mean, look at the as you said, at the top of the at the top of this broadcast. There were there was fear mongering over tariffs. And thus far, we have seen very little, if any, inflation. We've had great inflation numbers. So, you know, I think this idea of them not being able to break out of a certain mindset, you know, all these PhDs over there, I don't know what they do. I don't know what they do. This is like universal basic income for academic economists. Now, you got to admit, saying the Fed is universal basic income for academic economists, it's absolutely hilarious. And as the old saying goes, every great joke has a hint of truth to it.

8:36But maybe, just maybe, this is all noise. Do I think Fed Chairman Jerome Powell is going to resign? Absolutely not. Nope, not one chance. And I don't think he's going to be fired either. So we're going to listen to a bunch of trash talk for the next seven or eight months until his term's over. And it will be highly entertaining, but it's ultimately not going to matter for your portfolio. So sit back, grab your popcorn and watch the show. But Jerome Powell's most likely going to end his term as the Fed Chairman. Eric Jackson is a hedge fund manager with one focus. He wants to find 100 bagger opportunities.

9:07opportunities. He wants to buy a stock and see it go up 100x. And he's got a track record of finding a couple of these. And so I started to pay attention when Eric was talking about Opendoor having the possibility of going to$82 a share because Opendoor was trading at less than a dollar. And so Eric is here to explain to us exactly what's going on with Opendoor, why he thinks that this stock has a lot of room to run, and what he thinks about the entire meme stock community starting to pile into Opendoor and change the trajectory of that company. Here's my conversation with Eric Jackson. All right, Eric, you're becoming known as the man seeking out 100 bagger investment opportunities in the public stock market.

9:44Your latest call is that Open Door, which was trading at less than$1, is going to$82 over the next couple of years. And that's got a lot of people excited. But before we get to Open Door, let's talk about the hedge fund that you have. And you're using artificial intelligence to try to identify these top opportunities. What exactly is the technology doing? And then what is it telling you in terms of looking at Open Door? Well, thanks for having me, Anthony. Yeah, we've tried a lot of different AI models over the last few years. And frankly, most of them were a bust. You know, we looked at things like predicting earnings announcements, complex option trading strategies, you know, following moving averages, technicals and all this kind of stuff.

10:24And yet, like, there was one sort of common thread when we were kind of going through, like, what worked, what didn't work just a couple of months ago that kind of really kind of stood out. And it's that, you know, I, even before the AI and then, you know, helped with the AI, you know, seemed to have a really good knack for finding these really strong growers, 10Xers, 20Xers, 100, hopefully, you know, 100Xer in Carvana so far and hopefully more to come. And so we've really decided to kind of go all in on that approach of just, you know, getting the AI models that we have developed to this point to really seek out the common signals because there are commonalities.

11:06So, you know, we spotted Carvana early. We got the AI model got in and said we should get in at 11 in May of 23. I didn't I thought I thought something must be wrong. The thing was hallucinating. So it took a couple of weeks to check and double check. But before we got in at 15, I remember a couple of weeks later, I was on CNBC with Scott Wadner, sort of pounding the table. By then it was 25 because they'd pre-announced a good quarter. And, you know, still a lot of skepticism. Nobody expected that then. A lot of people now are hungry. I think part of the reason for the jump and open door just in the last week is just people now see what's possible.

11:41Like Carvana kind of shifted the Overton window. And now everybody's saying, OK, what's the next one? What's the next one? And when I look across the ones that we've spotted in the past, there are some common threads, but it's never a cookie cutter. It's never exactly the same. You know, Carvana had, you know, some heavy insider buying before they had the bounce back. But most, frankly, like 95 plus percent don't. You know, people don't buy a share or the insiders that supposedly know best. You know, Brian Armstrong never bought a share the whole way down with Coinbase as soon as they went public and all the way back up.

12:15doesn't mean it wasn't a great investment at the bottom. So, you know, there are some technical factors that we look for and that we spotted kind of in OpenDoor's case, you know, where sort of volume started spiking up a little bit abnormally compared to what we'd seen just in the months before. And, you know, anyway, we put those together. You know, I was familiar with the OpenDoor story from a couple of years ago where I thought it was going to be a candidate for a big turnaround like Carvana, but it never kind of panned out. But when I looked at it again recently, I said, hey, now's the time.

12:51Now, you came out with this$82 kind of call of where you think the share can go. It's trading for less than a dollar when you say that. What is the thought process behind it going up to$82? And then also, like, are you a little nervous when it's under a dollar and you're saying, you know, hey, look, I think this is basically 100x type upside? it? Well, just the fact that we've seen this movie before, especially with Carvana, like, you know, what I learned from that is that, you know, when Carvana went from 400 to three, you know, nobody at three was saying it was going back to 400, including me.

13:23You know, it's really hard. We're always a prisoner of the moment. You know, we get locked into where the stock is traded in the last few months or the last year. And we say, well, that's it. The ceiling is this, you know, if it has a good run, it might go 20 % plus, plus above where it is now or something like that you know we can't see the forest for the trees uh what i did and you know when looking at at uh uh opendoor is i i said uh okay like let's let's turn the noise off and let's just let's think of carvana as an example as a parallel because i think there are a lot of similarities both were money losing companies both were trying to revolutionize and kind of e-commerce, a fi, some space, some niche that really hadn't been to that point and grow a, you know, a market share in what's a huge market, but it's, it's very fragmented to this point.

14:15And with Carvana, you know, they were pre-pandemic, they were a darling, they were a growth darling. They got up to something like a 6x forward EV to revenue multiple before COVID. When they were going through all the drama of, you know, the hype interest rates and people saying like they have too much debt, they're going to go out of business. They dropped to a forward EV to revenue multiple of 0.5x. And now they're back to like a 4.5x one. And if you look at Opendoor, Opendoor still, you know, they're at the bottom. They're at that 400 down at three net level. And they're even less than 0.5, you know, forward EV to revenue.

14:55So I think the lowest I ever got was like point, you know, zero one or some crazy number. They have high revenue, but the market doesn't think they'll ever be profitable. This quarter, which they're going to report in a couple of weeks is they've already sort of hinted that it's going to be their first EBITDA positive quarter in something like three years. And so the thing is like, can they get to steady state profitability? I think they can. And if they can, that's when investors are going to do the same thing they did with Carvana. And they're going to say, well, I guess we were too bearish.

15:25I guess we got to recalibrate here. Hmm. What's a good forward multiple to apply to this company? And I think, you know, 5X is reasonable. If you go out to 29, it's, uh, they're supposed to be 12 and$12 billion of revenue that year. That's the Bloomberg, you know, consensus number. If you pull it up on the terminal, that's how you get to smack 82 bucks a share. If you kind of back out the debt and the cash and you look at the share count and all that kind of stuff, where it should be trading right now, you know, even, even now next year, they're supposed to do something like 5.75 billion in revenue.

15:58So if you suddenly had a market that was saying, oh, I guess they're not going out of business, maybe they are back to steady state profitability. Today, this would be a$40 stock. So you think from under$1 to$40 just in 2025 would be pretty interesting. Now, it's turning into a meme stock. There's a lot of people who are really excited. You know, the folks are piling into it. And you can see just the online chatter. I got people tweeting at me and seem pretty, you know, kind of like, hey, I have seen this before with the GameStops, et cetera. What do you think about the like energy of retail investors and kind of this turning into a meme stock?

16:33Obviously, that's got to help the case. I think retail investors are a lot smarter than what they're giving credit for. You know, earlier this year, I got into a company called BTQ Technologies. It's like post-quantum cryptography. They're, you know, they're trying to you know protect crypto wallets from a future quantum attack and um this is when all kind of the the the despact uh quantum stocks from 2021 like ruggedi and d-wave were like taking off right after president trump got re-elected and and um you know thinking that you know trump is going to support the quantum sector because we have to sort of keep ahead and you know what the retail investors were the first ones on the case with all of those stocks they were right in there and way before anybody on business television was talking about it.

17:20So I think they're a lot smarter and more sophisticated than they're giving credit for. They're not going to make, you know, today it's like, you know, open doors up like 80, 90 % in one day. I mean, obviously that's not going to happen with a Mag 7. You got to look somewhere else. And I think a lot of these retail investors know that. What do I think about it becoming a meme stock? Like, I mean, I lived through that whole craze like you did, Anthony. And, you know, I just never really understood like GameStop, AMC, BlackBerry. Like, why are they picking these weird, you know, dead companies, frankly?

17:56You know, what I like about Open Door, this is a real business. You know, the cost of trying to replicate what they're doing and their platform, it would cost significant money. And then now to have like a national platform, virtually no competitors. It reminds me of coinbase in december 2022 when the biden administration basically had told kraken get out of the us binance get out of the us like ftx went under uh basically coinbase was last man standing and you you know basically you had to say is crypto ever going to come back and like 99 of people said no it's terrible oh i'm a prisoner of the moment you know this is who wants crypto but you didn't have to look far ahead to see that if it ever did come back even slightly coinbase was so well positioned.

18:42Now, how do you put the exposures on? You're buying spot and also, I think, using leaps at times. I saw you talking about online. Talk a little bit in terms of your strategy. Well, again, I've made lots of mistakes in my hedge fund in the last few years. And I guess there's two big mistakes when I look back on Carvana. One is that I only bought equity. I bought in at 15. And I would say I probably sold the majority of my position around like, I don't know, 120, 130, something like that. And I'm thinking like, I'm smart. I'm taking a profit. I'm trying to follow all the common, you know, conventional wisdom, you know, lock in your profit.

19:22And, you know, if things are too good to be true, they probably are. And then sat, you know, and then sat back or I said to myself, hey, I'm just going to sort of trade in and out from here on in because I still believed in Carvana. And I'll be so smart. I'll get in a, you know, at the bottom and ride another wave and stuff like that. So what I figured was, A, I'm not that smart to trade in and out. I would have done much better had I just sort of bought that core equity position and not touched it, just sat on my hands, despite like turning on CNBC every day and seeing some headline of the macro headline of the moment.

19:55Oh my God, tariffs. Oh my God. You know, interest rates are, oh my God, Jerome Powell, turn that noise off. When you find these kinds of companies, you just let that position sit there and do not touch it. And then don't think you're going to be so smart to overtrade it. But the second mistake I made was I didn't buy the leap options that I should have, like right when it was like down at the trough, down at the bottom. You know, so you can lose lots of money in options if you buy two short dated ones. And it's just like setting money on fire. So, you know, give yourself some wiggle room. Give yourself some time.

20:31I certainly didn't expect Opendoor to have this sort of mass resurrection in a week. So, you know, try to go out as far as you can. Give yourself some margin for error in terms of where you buy the strike price and where you think it's going to surpass that, obviously. But I think that can work well in the same way for any investor. Again, it has to have the patience to kind of wait it out and not touch it and overtrade it. All right. My last question for you is give us like the 30 second pitch on why open is the big focus for you right now. Basically, they're in a space that, you know, they fill a need.

21:08They, you know, actually the guy who's my outsourced CFO used the open door experience to buy and to sell his home a couple of years ago. And he raves about it. You know, basically it's you go to a website, you type in your address, you know, they make an offer for your house. And if you want to accept it, cash is wired in within a few days. So it's a very seamless process. There's nobody else out there. I think there's a part, it's not going to be for everybody. Most of us are still going to use real estate agents, but there's going to be a section of the population who's going to want that cash now service.

21:43And they're the only national player in town doing this. It's not going to take much. I do think that there's going to be a drop in interest rates in the coming months. I don't think I'm going out on a limb and saying that. And when that happens, Opendoor's cut a lot of fixed costs out of this business. All that drop in interest rates is gonna lead to higher volumes to them and higher profitability. I think they're at steady state profitability. You're gonna see massive increase in profits along with the revenues. And suddenly that re-rating is going to kick in. And that's when we get to the$82 number that I'm talking about before.

22:18Makes sense to me. All right, where can we send people to find you online or find out more about what you're doing. My website is emjcapital.ltd and you can follow me on x at Eric Jackson. Amazing. Eric, thank you so much for taking the time to do this. Best of luck, my friend. For one thing, it is definitely entertaining as hell to watch all this play out and I wish you the best of luck. Thanks, Bob. Gotta say, it's pretty cool to hear Eric talk so passionately about Open Door and the work that he does trying to find 100 baggers. That's it for today's show. I hope you guys are enjoying this, having a blast putting it together.

22:49Please make sure that you're following us on X and please, please, please make sure you subscribe on YouTube. I'll see you guys tomorrow, live from the desk of Anthony Pompliano.