Lean Into The Silliness…$JETS and $BETZ

It feels like ‘do the opposite’ at this point in the rally.

Matt Levine at Bloomberg had a great riff on the markets yesterday, specifically on $JETS:

The US Global Jets exchange-traded fund, known by its ticker symbol “JETS,” had $33 million of assets in early March; now it has over $1 billion. To what does JETS’s CEO attribute his fund’s runaway success? Boredom:

Much of that explosive growth in assets can be credited to day traders looking to “catch the bottom” in airline stocks, according to Frank Holmes, chief executive officer of JETS issuer U.S. Global Investors. After speaking with newly minted JETS holders, he says the boredom of being stuck at home and the strong rebound in carriers after the 2001 terrorist attacks and the 2008 financial crisis are luring young traders.

“All these millennials, being stuck at home with no bars to go to and no beaches to travel to, took their money and became day traders,” said Holmes. “They’re bored, they want to make money.”

In particular, the growing popularity of JETS on retail trading platform Robinhood has “shocked” Holmes. The number of users holding JETS surged to nearly 30,000 this week, according to Robintrack, a website unaffiliated with the site that uses its data to show trends in positioning. That compares to 500 at the beginning of March.

Finally…

Also it is nice that he feels free to say this? JETS is not a company; it’s an ETF, a basket of airline stocks. Holmes does not manage an airline; he manages a company that offers people conveniently packaged groups of stocks with memorable tickers. “We put airline stocks in a box and slapped the name ‘JETS’ on it, and people bought the box because they were bored” is a reasonable thing for him to say. He offers a consumer product, and his business is about trying to understand why consumers like it.

It’s different if you manage a company whose stock is up due to boredom. When people ask the CEO of, say, an airline about her company’s strategy and financial position, she can’t really be like “well a lot of people are bored at home and buying our stock, so that’s helpful.” Elon Musk has come pretty close to talking like that, and people got mad at him for it. If you work for a real business, you have to mostly talk about the real business and ignore the sillier epiphenomena of financial markets. If you work for a financial business you can lean into the silliness.

Today, come spend a few minutes on the $JETS stream on Stocktwits and you will see the fun people are having.

Better yet, come take a look at the brand new $BETZ stream which is a newly launched ETF basket of online gambling stocks.

It’s like a circus…give the people what they want.

The Stocktwits frothomter is off the charts. I have eyeballed the end of day Stocktwits data for over a decade and have learned to spot some outlier data from the messaging data. The last few days I have seen 9 to 1 bullish to bearish tags. That is the highest I have ever seen. Of course that could mean we have entered some kind of new bullish paradigm where stocks are set to rage higher for an extended period of time. It coud also signal a coming ‘top’.

It is not just Stocktwits showing some ‘froth’. From ‘the chart report‘:

Many technicians are concerned that the market is getting frothy, as reflected by the extremely low Put/Call ratio. It’s 5-day moving average is currently at 0.49 – the lowest reading since the market peaked in mid-February. An extremely low reading from this short-term sentiment indicator tells us that market participants are abandoning their protective puts and buying more speculative calls, betting the market will continue higher. Grayson points out that extreme turning points in the Put/Call ratio often occur just before turning points in the S&P 500. After a historic 40% rally in 50-days, it wouldn’t be surprising to see the market pullback and shake out some complacent bulls. This is just one data point to consider within the context of other evidence. However, this is certainly one potential risk worth keeping an eye on.

Just another Wednesday in June…a historically quiet month in markets and on the Stocktwits streams.

As a long-time investor, I sense the froth and silliness will end in a few tears. As a co-founder of Stocktwits I say…keep it coming.

Disclosure – I have no position in $JETS or $BETS (but wish I did yesterday and this morning).