Moby Live: Rivian, Crypto, Zillow iBuying, Fed Tapering & More!

The following is a transcript of our latest Moby live podcast. Join our discord to be a part of these conversations every Thursday at 5:00pm EST // 2:00pm PST: https://discord.gg/DBhnJAkvHN

Peter Starr:

And now coming to you live from our Coast to Coast trading desk. This is Moby Live a weekly podcast where we discuss everything about the economy, the stock market, and the market mechanics that power your world as always, I'm your host, Peter Starr Northrop joined as always by our co-founder and Chief Analyst, Justin Kramer. Justin dude, what's good, man. What's life over in the East Coast going?

Justin Kramer:

Good man. Thanks for the intro. Everything's going well over here. Just another crazy day in the markets. Whether it's crypto, whether it's stocks, it's been a fun October and November so far.

Peter Starr:

You always love Q4. I love that September is single handedly, the worst month on the stock market and in crypto and it's followed up by October and November. November's off with a bang. We're right here at close. Once again, we are at a sixth record day in the row for S&P. Six positive day, another closing and record highs. But a really weird day, right? There's always mixed signals, Peloton's down huge after completely missing sales. This is the boring back half of earning season. We're also seeing Zillow just get crushed as they over leveraged their home buying business. While in the same vein, Airbnb is up 280%. So just mayhem, man.

Peter Starr:

We can talk a lot about earnings. We're going to talk a lot about crypto today. I think the main news as we think about the market today, as we're thinking about everything is actually yesterday's news. Which is that the Fed is finally genuinely suggesting they're going to actually taper. We're finally going to stop through the pandemic stimulus rates aren't necessarily going up. Inflation is air quotes, not transitory, but expected to. No inflation is transitory, but transitory in a transitory way. I love the very sooth theory way, we talk about monetary policy in this country. So a lot of cool stuff coming out of the Fed, Justin. And you have a lot of great perspective there. So just take me through, what does taper time mean? Is this the right time to taper? And is this going to help take some heat off of the economy right now?

Justin Kramer:

Yeah, no that's a great question. And whether the Fed does it, versus what they're signaling is a completely different topic. You've seen them kind of start over the last several years saying. And we tweeted actually a pretty funny infographic about this saying, "I'm going to think about tapering. I'm tapering. It's on its way. It's coming." And then it never comes. And so this is something they've been alluding to for a while. They've been pumping up the economy through quantitative easing using for years now. And so in theory, it should start happening soon. They should start raising interest rates. Whether that happens, I think is anyone's guess at this point, but in theory, they're starting to signal it. And assuming they do, do this, then we have some serious implications for the stock market, for the crypto market. If they start raising interest rates. We wrote a piece on this the other day for anyone who's a premium member.

There is a really good chance that tech valuations continue to get hurt. We're at all time highs right now for valuations. And if this continues to happen, we'll see more and more of rotation into cyclical financials other areas that typically do well in a high interest rate environment. And then on the inflation side, it should be interesting to see what happens with a lot of different stocks as well. Especially within the crypto world. Inflation in theory should spell more adoption into the crypto world. And we're starting to see that now, if it continues to run rampant and it gets to the point where the stock markets hurt. I think that will be the inflection point to say, "Okay, there's really no correlation." Or there's a negative correlation, or, you know what the stock market tanks and so does crypto. I don't think there's really enough data either way to point in either direction yet. But those are two major factors that are going to really influence the next several years of the stock market and the crypto market.

Peter Starr:

And I think that's the most important thing to consider, right? The main thing we're seeing is, we've been talking about tapering coming for almost a year now. We've been seeing just all of this money, get poured into the economy and thinking, "Oh, that's bad." And not really understanding what that means. And the only answer to those questions is, "Hey, we're going to only be able to know this on a very long time scale." Right? So it's really important to keep that in mind. We can keep speculating, tapering may not necessarily cause a correction any more than inflation could, you've got kind of two very interesting competing forces, right? You've got inflation and you've got just the need to taper and seeing just where that, that piles in. So it's very interesting to see how that's going to affect our investments moving forward.

Peter Starr:

Name of the game as always, is going to be volatility, but you did allude to crypto. So where, we're experiencing some very... Not necessarily the same kinds of all time highs we're used to in crypto bull runs. Eth is up in a weird way compared to Bitcoin. And there's a lot buy, we finally had Shiba just... Not necessarily, Shiba's not done, but it's definitely corrected a bunch. So maybe there's a chance it'll pop back up. But we're seeing a lot of blood coming out of the meme coin space. So Justin, just your views there obviously Solana's still up. Solana's on a really interesting consistent three day rise. What are your thoughts in the crypto space then as we sort of think about. Well, monetary policy in the US is about to get kind of wild and kind of nutty with it. So what are your thoughts in terms of how crypto's going to perform in this new kind of environment?

Justin Kramer:

Yeah. No, it's a really good question. And I've had a lot of conversations with a lot of people on this topic. Whether it'll continue pushing up or come crashing down. It's in a very interesting point right now. So when you look at historical bull runs and using 2017 as the most recent example. Crypto surges up, it has these week over week spikes and a lot of it was retail driven in nature. And so when it eventually crashed back down, there was a long wall period. And then 2020, it starts picking back up. And then obviously 2021, it's been an absolute explosion ever since. This time around, it's a little bit different because a lot of it is actually being we by mass adoptions at the institutional level. And so when you start having ETFs approve and you start having other ways that the real big money can start accessing it in a safe way.

Justin Kramer:

That's when there's tailwinds, that didn't exist in 2017. So with that adoption, for sure, it's hard to say this is an Apple Staples comparison with us or at run up, there'll be a large crash down. So that's one side of equation. That's kind of making us think that this bull run is in its infancy. Sorry, get that one out. But on the others side of the equation, you have prices being as high as they've ever been. The market caps are real now they're not in the millions they're in the billions and the size of the market is getting really big and price runs like this typically can't last forever. And so predicting day to day movements is really tough. And for day trading, that's something that we do talk about in Discord all the time for very short term fluctuations.

Justin Kramer:

There's good buying opportunities, for longer term trends in terms of saying Bitcoin Solana, any coin is going to be at 50% of its value or 150% of its value in the next two, three more months. It's tough to say, because trends change so often. And so it's a long winded way of saying, we've continued to say this for years and we will say this for years to come. We fundamentally believe in crypto. And we fundamentally believe that the prices are going to drive significantly higher over the next decade.

Justin Kramer:

But over the next few months, if you start getting involved and you start investing, if it comes crashing down, don't be discouraged. This is something that's going to be a generational investment, not year investment or a two year investment. So you have to be thinking about this for a severely long period of time. And then on the sure stuff on the trades and things that we caught all the time. Those are things where you can be a little bit more opportunistic, but there has to be that bifurcation between your short term trades and kind of that long term, if that makes sense.

Peter Starr:

Exactly. And for me, crypto is a really great place to start thinking about the concept of day trading, because you're going to have far more understandable swings. Rather than a 2% you can see something as wild as a 7% swing in a single day in a particular asset class, right? And that's what drives a lot of the excitement in the crypto market, because you can have a very dramatic day where Bitcoin or Ether are up 15%. And then two weeks later have an equally dramatic day where you say it's the end of the world. Bitcoin is down 20%, yada yada yada. But I think the interesting thing you apply here is that it's actually a generational investment. And there is a lot of this volatility right now that makes crypto very interesting. But it's one of those things where you can play the low and slow game.

Peter Starr:

You can add it into your portfolio during these bull runs and then kind of think about the best places to take profits and then add during a bear market if it continues. But I think this is actually a question that came in from the audience. When we think about all this institutional money, this is genuinely a game changer, right? And I think a lot of people might not think about it in the right way. People think, "Okay, institutional means lots of money, which means price go up lot more. I have a brain, I love it." But I guess the main question is Justin, when you have institutional money, does that increase the volatility does that cause the price of a crypto asset to go up even higher and then crash even harder or does the amount of money that institutions bring to the table act as kind of ballast. So it drives the price up, but drives it a up slowly and helps kind of stabilize the market over time. Does that question make sense?

Justin Kramer:

Yeah, now honestly, the answer is a little bit of both. So when you have say I'm making this number up, but when you have what's called retail investors in developed countries. The amount they're putting in 1% of their wealth. I mean the totality of that really pales in comparison to 1% of a country or major institutions around the world putting in 1% of their wealth. And so when you look at major funds around the country, the amount of assets they can pour in, then subsequently raise the price, just absolutely dwarfs what the retail level can do. So when, for example, if you're looking at the Harvard endowment fund, which is one of the largest endowment funds of the world. The size of the fund, I think as it was last measured was at 53 billion dollars. So imagine they put in 1% into crypto, the Yale endowment fund does the different endowment funds around the world. Different pension funds.

Justin Kramer:

The amount of assets that then get poured into crypto relative to what had been done historically is just so drastically different. And so when you look at Bitcoin and it has a market cap in the trillions now. Pouring in an additional hundred billion, 200 billion, 300 billion has substantial effects in terms of the price rising. Conversely, it has the same effect if institutions decide to pull their money out. And so right now, while there's a high market, a lot of institutions are trying to get involved. ETFs are giving people easier access, but as soon as these institutions they have different mandates. They can't have year over year, negative returns.

Justin Kramer:

They have certain risk functions that they'll have to trim it. If they start pulling out their capital, in mass, that's when you can start seeing runs on coins that even if there's wide scale adoption in the longer term, these short term fluctuations are inevitable. Based on just institutions, rebalancing their portfolios and just this mass amount of money moving around. So to answer your question, it acts both as a tailwind and as a headwind and just does create and adds more volatility to the market for sure.

Peter Starr:

Exactly. Yeah. And it's one of those things where we, we have to consider it understand that. Even though yes, the Harvard endowment has billions of dollars and if they put 1% in, that both A can add volatility and add ballast. If you think, "Well, they're not going to move it that quickly." It's just as easy to move around in crypto, if you're a large whale investor, as it is, if you're a small one. So keep that in mind, if you're trying to use the argument, "Oh, this adds ballast, this adds stabilization to the price. Not necessarily, we're still in this generational shift in this very bizarre period where, we really aren't going to know how crypto did until 10 years from now. And it's just one of those things where invest cautiously invest carefully, but invest with a long term perspective. And you're going to win.

Peter Starr:

If you want to day trade, do it as a hobby style thing with a hobby style budget and that's one really interesting way to play it. When we think about other news and trends, when thinking about sort of money changing hands and sort of people getting in the upper hand and lower hand. Obviously Zillow has been in the headlines a lot with this very incredible just... First they completely run up the housing market in several neighborhoods, then over life version themselves and now literally drop iBuying as part of their whole thing. Their shares are crashing. We don't need to dance on graves or anything, but you had a very interesting tweet today, Justin. And then after that more shares in open door sort of skyrocketing.

Peter Starr:

So just what, what do you think about sort of the, the way the housing market is shaking out with these algorithmic players coming in and Zillow's case completely botching it. Driving up prices for no reason, and then having to sell for really, really low levels. And now that Opendoor is having this kind of resurgence before their earnings call on the 15th, I think. How does that play into the overall housing market? What are your thoughts there in terms of open doors strategy here and how, how do you feel that kind of works moving forward?

Justin Kramer:

Yeah, It's a really good question. And I think people don't realize is how... And obviously everyone knows real estate's a massive market, but they don't realize how big the opportunity is for companies like Opendoor. So, the global real estate investment market I think it's around 10 trillion dollars. And so when you look at the amount of revenue opportunities that a company like Opendoor get. When you think about tamer of an opportunity, there's not really that many different parts of the market that is that big. And especially for companies that are in terms of nascency how early on they are to the market. And so Zillow obvious historically has been more of a marketplace platform, connecting users and connecting brokers. And they moved into this iBuying model and a large part of their stock run up over the last year or two, has been really largely due to the hype around this whole entire business model, which was the thing as Opendoor.

Justin Kramer:

And so with them just dropping out of the race, you saw Opendoor fall, I think five or 10% over the last day or two. And it was a lot of skepticism thinking, "Okay, well, Zillow can't do it can Opendoor?" And so fast forward today, the answer from the market has been without a doubt. Yes, the stock price is up over 10, 15%. Last I checked earlier today and the CEO of Opendoor has come out and more or less has said, "No surprise here that Zillow can't do it." They're pronouncing earnings next week. And he alluded to a very strong earnings call. I'm very hesitant to trade the stock around earnings, given, the values and the spikes we've seen over the last year.

Justin Kramer:

But based on a lot of the commentary that's come out of his mouth, I would not be surprised to see them report some monster numbers. And if they can do well and even if they don't do well, but they allude to doing well in terms of outlook for the next several years, the opportunity for this company is so ridiculously massive. And now with one less competitor in the market, I mean, they have the opportunity to be a generational company that I just don't think that they're getting the talk that, that frankly should right now.

Peter Starr:

It's really interesting thing how Zillow really owned the conversation, right? And just Openddoor has been kind of an afterthought and it's really awesome seeing them kind of come into their own. And it's also just watching a lot of smaller companies that, really weren't big considerations when they come into their own right now today as well. We're watching all these supply chain issues and everyone saying, "Hey, you're going to need to do your Christmas shopping super early. Etsy is up 13% off of just massive sales members as A more people join the platform because of the pandemic to start their own businesses. And B people kind of leave these supply chain woes behind and seek out better places to get gifts for their family members or more personalized products. So that's really awesome to see. Even one one big as we get into the half here, man, as we sort of think about audience questions.

Peter Starr:

One main thing we're seeing is a lot of people trying to think about some of the earlier calls we've made. And one big call that you made back in 2020 was Moderna right? Moderna absolutely skyrocketed off of their incredible mRNA technology. And one thing we're seeing today after their earnings call, there isn't as much demand for the vaccine as there was before. So sales are down a lot. So I believe Moderna is down something ludicrous 16% post post-market. So is Moderna the kind of company that only exists during a pandemic situation. And as vaccine demand for COVID 19 goes down is Moderna, just going to kind of quietly go back and be a normal biotech player? Basically half the stock price. Or do you see this as more as a buying opportunity slash value play? Not to put you on the spot, but just like your high level thoughts there, man.

Justin Kramer:

No, it's good question. Moderna just came out of nowhere in the last year, obviously due to the COVID a 19 vaccine, the efficacy, everything that they were able to do and accomplishing such a short period of time was outstanding. And so there was obviously a lot of hype that was built into stock and as they started adding in more mRNA vaccines and treatments into their pipeline. They start getting more hype and the stock has just continued to kind of rise in value. And so there's an interesting, dynamic at play right now where the stock is doing well because of COVID 19 and how successful they have been and will be. And then slowly in part it's also due to the hype around the drugs going forward. And so the numbers came out. I mean, they weren't bad, still doing five billion in sales, three and a half billion in net profit.

Justin Kramer:

And then when you look at other companies they're only trading at seven X and Apple, for example, is trading at 30 to 35 X. And so I think that discount is pretty wide and obviously they shouldn't be compared against Apple. But their valuation relative to other biotech players and other companies out there. I think is discounted relative to what it should be. And as production starts moving back up and there's more initiatives around the world in terms of getting the vaccine distributed, I think they'll have more revenue opportunities than they do today. And then kind of looking past that if you even compare them against Pfizer in biotech, they've only basically been in production for a year now. And they more or less matched what Pfizer was able to do, which is pretty outstanding. They have pretty superior effectiveness over Pfizer as well.

Justin Kramer:

And they have shown basically zero deaths per 10,000 people. And so it's pretty impressive what they've done. And when you look forward and I know they're looking at HIV and other treatments out there. Or other ailments to go in and treat those things could end up being multi-billion dollar opportunities as well. And ultimately the testing phase and the approval process will be much longer because there's not going to be emergency approval, like there was with the COVID 19 vaccine. But these are things that are going to propel the stock going forward.

Justin Kramer:

And like this mRNA treatment it's relatively new and it's not going away. And if they are in a position to really capture a large market share here, which they've shown that they can, they should absolutely skyrocket in years to come. So the stock could continue to fall more in the short term, but in the long run, if it's up five, 10 X from now, whether you lost 10% or 20% of the all time highs, I don't think you're really going to care. So, if you're looking at this from long term perspective yeah. If you want to use this weakness to getting grade, if you're looking at over the next six to six months to a year, it could keep sliding more. Just, it's tough to say over that short time horizon.

Peter Starr:

Exactly. The bottom's really hard the time. And I think one thing that's really important to point out here is that for a lot of retail investors, Moderna was probably your first foray into biotech. Not healthcare, not pharmaceuticals straight up biotech. And it's really important to keep in mind that the emergency approval for the COVID 19 vaccine was absolutely unprecedented. And well, first of all necessary and B safe, but C unprecedented. And the fact that Moderna stood up a superior product, their vaccine, helps people produce more antibodies, net versus Pfizer, and the other vaccine providers it's the superior vaccine. The fact they put out a better product at the same volume, technically faster than everyone else is a huge testament to their organization, right? But now we're going to crash down into regular biotech numbers, folks.

Peter Starr:

We're going to go into the regular approvals processes. Their next treatments are going to be years away. Their HIV vaccine is now recruiting, but that still means that any positive revenue news is, you know, years away. So it's hard to predict the bottom, but just keep in mind that it's now going to be a very much long term play. So audience, I really, really appreciate your questions here as we sort of get into the final three minutes of the process, right?

Justin Kramer:

Yeah. Totally and not only and we definitely appreciate it. And I think I want to know one thing as well. Is reviewing which we've been getting questions not.[Crosstalk 00:21:47]

Peter Starr:

Yeah exactly. I was literally going to, you've ruined my segue. Because we're talking about huge game and everyone is still moping about missing it. A lot of people, bought Tesla in 2015, it went up to about $45 a stock and that's good enough paper handed out and now we're just kicking themselves. Now that Tesla's a trillion dollar a company. And so everyone's wondering, will I do the same thing if I get on this Rivian IPO? So Justin, I would really love your perspective. We don't know the date of the IPO for Rivian yet. Now we're just shifting into EVs, but real fast lightning round Rivian IPO. Yes, no, maybe so. What are your thoughts there?

Justin Kramer:

Yeah. I mean a 100% yes. We've wrote about Lucid recently, have been big fans of what they're working on. The market opportunity is so large and it's not going to be a winner take all market. There needs to be electric first companies that are doing well. And so even though GM and other companies are doing great things, the DNA of these companies is just going to be so drastically different that even if they're semi successful, the opportunity is huge. And so when you look at Lucid and you look at Rivian and you see these crazy $50 billion valuations for a company that's basically doing $0 in revenue. It's insane, I mean, nothing as that has really ever existed just to some extent. But with Rivian specifically, the things that are getting me excited is like I said, the market is insanely big.

Justin Kramer:

And so they also have support from Amazon on top of their consumer vehicles, which is really interesting. And what they're doing very differently is they actually have a recurring revenue stream. Which is very obviously different for a car company. And they do this through their software and through their charging. And over time, this is where the real moonshot is going to to be is if they're able to patent their battery technology and then apply that patent to other verticals like utilities and everything that is going to become electrified over time. And so yes, they're a car company, but they're also thinking about applying their technology outside of cars. Which isn't being done to the same extent with Lucid and some of these other electric first car companies. And again, this is going to be a decade plus play, but this is something that even if they're semi successful is going to completely skyrocket in value.

Justin Kramer:

And so today, without a doubt, they are a 100% significantly overvalued. But if you're waiting to find the floor to get in, this isn't the time to do it. By the time the companies start being worth, what they're actually traded at in terms of evaluation perspective, it could take insanely long period of time because so much hype is built into it. So, what we're doing is we're getting involved now, like I said, similar to Bitcoin is a generational investment. This is going to something we're going to be holding onto 10 years from now. And similar to Lucid, similar to Tesla, I think Rivian is going to be huge, even though you're paying up for it a insane stock price. But that's just where we are in the EV market right now. Unfortunately.

Peter Starr:

Exactly. And I know people are thinking about it in terms of, "Well, no, it's not going to be like that because Tesla's basically a borderline meme stock." You have to understand what the pandemic just demonstrated to us. It just demonstrated how fragile our supply chains are. And so in the last year and a half Tesla's chief strength has not been of being a luxury car company or having as much market share as it does with no advertising. Its chief advantage has been an extremely limited supply chain. A internal combustion engine has thousands of moving parts that need to be manufactured across a whole continent essentially. A battery is just, a pile of lithium that you put together in a really complicated way, and electric motor is, basically just three parts at the end of the day. I know I'm massively over simplifying don't hate me, but keep that in mind too.

Peter Starr:

We've seen how strained our supply chains are. And so we need to not only move away from fossil fuels, we need to move away from these overcomplicated supply chains. So companies can actually take a punch if things go sideways like that. So keep that in mind, moving forward. Always these huge rises, don't just reveal the obvious things about the market. Yes, we need to move into an electric future to make sure that we don't cook the planet, but in the same vein, we need to make a simpler future. Because simple you need to work smarter, not harder, dude. And that's what's really cool about our economy. It's constantly evolving, it's constantly becoming more efficient. And we're finding new and interesting ways to be more productive and to build better products with less work. So I'm really excited for that future.

Peter Starr:

Justin Kramer, I'm really excited to have you here. Audience, a lot of you are filing in now because we have an intern program here at Moby.co for administration and our email intern put out that this podcast starts at 5:30 Eastern. And when in fact started at five. So if you're just showing up now, we're sorry for that. We're going to be sending out the recording tomorrow morning. You will get access to the whole podcast recording. Forgive us for that flub as we get the infrastructure going on this side here, we appreciate your patience. But Justin Kramer, I know we are literally at your time limit. So any final thoughts you may remember before I go ahead and read the credits here, my dude?

Justin Kramer:

No. Yeah, I think that's super comprehensive. So thanks for walking us through all those questions, and giving the overview super helpful. At least from my perspective. Yeah. The only thing I'll say is, we're at an interesting time now and we say this every single week for those who joining. Anyone who's been following our research. We say this all the time, but this is exactly why being a long term generational investor is how to build wealth. Peter, you talked about it before with companies like Tesla. you need to fundamentally buy companies and not get out too early and hold onto them. So talk about crypto, you talk about stocks, you talk about whatever it is. Having that long term mindset is how you build up wealth over time. If you're trying to play the stock market and buy low, sell high over a week to week basis, you're... It's a tough game to win.

Justin Kramer:

I mean even the best hedge funds in the world, 80% of them are underperforming the market. And so if you think about how challenging that is for them to do year in and year out, it's going to be difficult for you to do that on a week to week basis in terms of trade. The ones who are holding onto stocks for multi-year periods, that's where there's real wealth to be made. And so when you think about certain stocks, certain companies, if they are able to 10 20, 50, a hundred X, the stocks that don't do as well, those will pay for them, and then some. And so that's how you have to think about it in terms of taking calculated risks. And then the other portion of your portfolio can be in safer things until you're ready to deploy capital elsewhere. So say this every week, we going to say it again going forward, these are the types of things that you need to do to kind of make yourself a better investor to be honest.

Peter Starr:

Exactly, build that diverse portfolio, stay in the game for a long period of time. And you'll be very surprised just how these things correct over time. Justin Kramer it's really awesome having you on. I know you are literally at your time limit. Audience, thank you much for your awesome questions. Thank you so much for being here with us. I didn't get a chance to answer a lot of questions or address a lot of comments. I'll be hitting you guys up in DMs and perhaps even just doing a video response to a lot of these. Regardless folks I really appreciate your time today.

Peter Starr:

Thanks so much for joining us. I'm going go ahead and read the credits now. Audiences just so you know, this podcast was produced, hosted in voice by me, Peter Starr Northrop. Our Chief Analyst here today was Justin Kramer, the co-founder and Chief Analyst here at Moby.co.

If you want to learn more from us, feel free to check us out on YouTube. That's www.youtube.com/c/mobyinvest, we're also on Instagram, TikTok, everywhere else. Hit us up here in Discord if you have any questions, otherwise audience it's been so great having you here. Thank you so much for all your awesome questions. And as always, I'd like to lead you with peace, love and incremental gains. Everyone be well, thank you so much.