Kingsview CIO Scott Martin discusses the manipulation of GameStop and the fundamentals of the market.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: Let’s go to Ann Berry, I believe she’s still with us and Scott Martin, is Jackie with us as well? I just see Ann and Scott, So Ann let me get your take on that – Jackie is there – basically this is going to go on a long time. And basically, I can kind of see that, you know, the political response – We better not leave this with no response. They’re under increasing pressure by their own words and their threats to do something. What I’m not clear on and I know you’re leery of maybe the government getting over involved here, but that something is going to be done. I guess what I’m asking you then is what would do the least harm in the market’s eyes to police this? Because the market, I guess, is always worried if you police them how soon is before you police us, if you restrict their trading, how soon is it before you go after restricting our trading, if you charge them for doing what they did – how soon is it before you charge us for trades and all this other stuff that’s out there, you know, all across? I’m just wondering what would be the least foul alternative as far as government interaction here?
ANN BERRY: You know, Neal, I want to wonder whether one of the lessons that could be taken and looking at the banks out of this financial crisis could start to be applied for some of these alternative asset platforms. One of the things that the CEO of Robin Hood is saying in different ways when he’s asked the question is we weren’t ready. We couldn’t have anticipated for this to happen. And so we didn’t have the liquidity available to handle the unthinkable. And so, Neil, when I think about what could be a path of less harm as the new administration learns their way through this, is there a way to ask the Robin Hoods of the world to move the hedge funds of the world, to do more stress testing, to really try and analyze what would happen to their business models under certain risk scenarios or even thinking the unthinkable and make sure that they have a plan in place, a business continuity plan in place to handle it. So that’s one idea I would throw out there that helps to get some education going to the regulatory institutions, but also forces some of these business to make sure they’re prepared in ways they haven’t been so far.
CAVUTO: All right Ann but that makes way too much sense, so that’s not going to happen. So we’re done with you. Scott, I’d be curious to what do you tell investors? Because I’ve always step back and I’m always intrigued by how you guide investors through something — you can understand their frustration about. This is the only game in town. I see so many people around me and hear about these guys have become instant millionaires or would have should have could have on Bitcoin when it was trading at a thousand. Now it’s north of fifty- one thousand. They want in on that party. But as you know in your young life, I mean that, that, that’s not a widespread or heavily attended party. There are very few people who managed to pull that kind of thing off. So, what do you tell them when that especially younger investors who hear that you’re offering them a, you know, a market superior return, but they’re saying, well, yeah, eight, nine, ten percent, no, thank you. I want the fifty, hundred, three hundred percent return. What do you say?
SCOTT MARTIN: Yeah, they want the stuff that everybody’s talking about. But I don’t think a lot of people, to your point, Neil, are actually getting it – makes for good headlines. It’s good sensationalism, but it’s really not there as investment advisers. I have clients of my own, Neil — You know, we try to steer clear of some of this really speculative stuff. I mean, unlike Roaring Kitty and nothing against them, I don’t know him personally, but for him to come out and say that GameStop was an attractive stock at five, ten, fifty, one hundred, because the fundamentals seems nuts to me. To your point about stuff that we invest in, like the Amazons, the Googles, the Microsoft, the Apples, the Adobes, PayPal’s Visas, companies, we really like and understand and fundamentally have some security in them. Those are where we direct our investors, because unlike some of the comments in the previous segment about how this is a bad mark on the overall market, I really don’t think it is. I think to put GameStop and Bed, Bath and Beyond and AMC and Fossil and a couple others, these stocks that got really manipulated into the same category as, oh, this can happen to Amazon and Microsoft and Google. I just don’t see it. Those companies are way too big and way too actively traded to have this kind of manipulation that came through on GameStop when it was trading at five dollars a share and was well under a billion dollars in size. I mean, it was as Charlie said earlier, basically a penny stock. So we try to steer clear of these kind of speculative names, Neil, and get people into real fundamentals of the market, which you can find and you can find return and you can find some safety and some more predictability and I think the names that I mentioned.
CAVUTO: That’s interesting, I just should have listened to my teenage sons because, well, I thought GameStop was going out of style because we all download games and they seems plenty cool to us dad and by the way, just give us thirty bucks for this. So maybe I missed something there, but I’m clearly showing my ignorance. But, you know, Scott raises a very good point, though, Jackie, when you think about it, he drew distinctions and did research and his firm does research as does Ann’s. Just take a look — there is a difference between an Amazon or, you know, some of these other companies that come along or Tesla that — that are building something that a smart analyst could start, you know, crunching the numbers, saying alright this is not a Pets.com, this is not some pie in the sky investing on potential versus earnings that might never come. There is a craft to that, and it’s called homework. It’s doing your research. Sometimes the research doesn’t pan out right away. Early investors of Amazon were frustrated. They weren’t seeing any gains for a long time before where they were. But –but — but there’s no shortcut to homework. I don’t know what that’s, you know, any sage advice on my part. But I would say that, you know, hard work is one thing, but also doing your research matters, no matter what it is in terms of buying, you know, a furnace for your home or, you know, checking out contractors and who’s good at what and yeah, buying stocks, that that might be risky. What do you think?
JACKIE DIANGELO: It’s a lesson for all of us, Neil. And it applies broader than just the stock market as well. As you say, you know, when you work hard for a buck and you’re going to spend it on something, whether it’s an equity purchase or a physical asset, like you mentioned, you know, remodeling, whatever the case may be, you do need to do your research to make sure that you don’t get burned. And you mentioned the companies, the tech companies that everybody loves, like Amazon, Microsoft and Apple. These are companies that if you sat back and looked at them and you could pull their financials up on the Internet, you could see they have cash flow, they have earnings, they have a business model, they have innovative leaders. They’re trying to change their business model with a plan, with a structure. The last time that I was talking about GameStop before the frenzy was an assignment where I was standing in front of GameStop telling you about the fact that there was nobody in the store, nobody was buying anything, and this wasn’t a sustainable business model anymore. So there are some people out there like Roaring Kitty, for example, who will say, well, they finally got with the program and they’re not just selling these game cartridges. They’re going to start competing with Fortnight and all of these online gaming apps and whatever the case may be. But they’re really, really late to the party. I mean, so what it comes down to about investing is sit back, look at the thesis, try to understand what the business model is, what they’re doing. Are they an early mover? Are they late mover? Really basic stuff. But to your earlier point, people look at the stock market and they see other people making these kinds of gains and the Hedge Funds and smaller investors and they want a piece of it and they sort of feel like they’ve been left out of it. So, something like this happens with GameStop. And remember the role that technology played here. I will disagree with Roaring Kitty and say this is not like the conversation that you have on the golf course or at the water cooler. The technology democratized that conversation the same way it did in the Arab Spring, which I covered, for example, where people were able to organize themselves and they were able to get together in a way that they never have before, that technologies out there. So this is not going to stop as we move forward.
CAVUTO: Yeah, you know what gives me pause, though- and reputable stock people who follow the market for a living, they generally don’t have nicknames, right? I mean, I know Warren Buffet is the Sage. I get that. But Scott Martin is not Madman Martin, you know,
MARTIN: I might be now.
CAVUTO: You are now. But if I know I’m going in to an investment recommended by Roaring Kitty someone should grab me and just say Neil now what are you doing. And, and sometimes these are manifestations of a lot of craziness that well I tell people maybe you should step back a little bit. There might be perfectly justifiable reasons to get into this. And you like hearing them from a guy named Roaring Kitty. Fine. But maybe that should tell you something that maybe that should indicate how frothy and almost theatrical this is, this has become. But I’m just wondering whether that kind of behavior that drove mentality to follow that behavior is part of the problem here. We’re getting a little ahead of ourselves. What do you think?
BERRY: I think Jackie sort of touched on when she talked about the Arab Spring, I mean, the fact that that could be drawn as the comparisons extraordinary, but it points to the idea that this crowdsourcing of ideas, social media pulling on so many different individuals to come up with ideas, project them and amplify them, whether it’s on stock trains, whether it’s or political positions. I think what you’re really sort of leaning into here, Neil, is do we have appropriate disclaimers? Do we have on these platforms enough caveat emptor or buyer beware warnings that the content that people are receiving is not from folks who are professionally trained in that whole homework process, which Jackie laid out. And so, you know, I don’t know that Madman Martin necessarily is going to be the turn of the people to listen to those voices. I mean, I will see that Twitter handle, I’m sure will bounce up. But I do think it’s about disclaimer. And again, I think it comes about how do we reach folks, younger folks who are digitally native, who are growing up with social media and mobile devices in their hands, and how do we teach them early to do their homework on where their content is coming from and to make sure that they’re educated from lots of different sources before they go ahead and pull the trigger on some really risky behavior.
CAVUTO: All right. I’m still working on a nickname for you Ann, Scott I have you figured out. Jackie, don’t get me started, but we’ll see. We’ll see what happens. By the way, one viewer is letting me know who are you to rail against nicknames, Neal? That he’ll see what you see up there with amorphous