Reality And The Stock Market | Podcast Episode #110

0:00
Hey, everybody, this is Ryan Mallory with Swing Trading the Stock Market. And let’s do another email here, shall we? This is actually a good one. This one comes from a dude in Spain, and he said I could use his name, but I kind of like making up my names for these people.

0:15
One, because I don’t want any unforeseen consequences to come his way for me using his actual name, but I, I like kind of applying my own name. It doesn’t have anything to do with the person. Most of these people I’ve never met, actually, all of these people I’ve never met before. And this guy, he’s, like I said, he’s in Spain. He actually thinks that he might be my furthest listener.

0:32
That’s not true because I actually had a Zoom meeting today with a guy in Australia. I think Australia is about as far as you can get from Florida. I don’t know. I mean, maybe if somebody was in Antarctica, that would be pretty, uh, far out there. But I think Australia takes the cake. Spain’s not, not too shabby either.

0:47
Spain’s, Spain’s a long ways away. Here’s a crazy thing about me, I have never been on the other side of the pond before. I have never ventured to the other side of the ocean. So, uh, yeah, one of those things I need to put on my bucket list, but I’ve been so busy in my life. I’ve, I’ve not really, uh, made vacations a priority.

1:03
Maybe I’ll do that in retirement. Maybe that’s not a wise thing. Maybe I should, uh, do things for myself that’s, that’s exciting and fun and everything else. I don’t want to do it in COVID, that’s for sure. I’m sick of COVID, honestly, so sick of it. I can’t even begin to tell you how sick of it I am. I go to pick up my son today, forgot the little name tag in the pickup line.

1:22
They say I got to come in, but I don’t have a mask on me because I wasn’t expecting to get out of the car. They’re making me come in the building with my like shirt over my face. It’s like, come on, man. I’ve never even had the flu before. Never even had the flu. You gotta act like I’m like some kind of parasite, right? But I don’t know. I, I, I know there’s some of you guys out there.

1:38
That swear by the mask and everything. Maybe because I’m a Florida guy and Florida guys have a bad reputation, Florida man, right? Florida man doesn’t wear the mask. I don’t like the mask. I really don’t. So sue me for it, right? But I, does that mean I don’t ever wear it? I do wear it. I wore it because I had to go get my, uh, Panda Express this afternoon.

1:56
When I was hungry, you know, it was dinner time. I, I needed Panda Express. They weren’t going to serve you without the mask. I guess I got to respect the private establishments. That, you know, I mean, if private establishment says, hey, if you want Kung Fu Panda Express, you gotta, you gotta wear a clown outfit. Well, I’ll probably be wearing a clown outfit because there’s that once every 2 or 3 months where I’m craving some Panda Express.

2:18
In any case, my, uh, whiskey for choice tonight, I’m actually making myself an old fashioned again. Uh, I, I take my old fashioned serious. I think I’ve told you this before in a previous podcast. I use Knob Creek Small batch. 100 proof, very good. The reason why is, I don’t drink Knob Creek by itself.

2:35
Not a fan of it by itself, but with the old fashioned, it’s just got enough oomph to it to make it just a really solid old fashioned. So, don’t get the mixes either for old fashioned. Do it yourself. Get some bitters, get some orange bitters, get some aromatic bitters, make your own simple syrup. Don’t get it in the, the, the jar at the supermarket.

2:52
Like I use, I go to Publix, they sell simple syrup. I’m not getting simple syrup there. I’m making my own. I take a cup of sugar, take a cup of water, mix it together. You got your simple syrup. It tastes great. I don’t need all the fructose and all that other, whatever that other stuff is in it. And then I put the Knob Creek. I do 2 ounces.

3:07
Most of your establishments, they’ll put like 1.5 ounces, and then they’ll use something like Old Forester 1910 or 1920, and it’s got like 42% alcohol or 84, uh, proof. Go with the Knob Creek, it’s got a good kick to it, man, because it doesn’t matter if you’re like using high-end. Just don’t go Jack Daniel’s.

3:23
Jack Daniel’s, I just don’t think that’s good in anything. Go like Knob Creek, you know, when you mix it in with all the other stuff, get an orange too. Craziest thing, I go to Walmart specifically for my oranges. There is more like oils and everything else that come into it. So when I express it over the, the, the mixture, it’s unbelievable.

3:40
OK. I’m like 4 minutes into this podcast already. These things typically go 15-20 minutes and I’m talking about old fashion. So I need to pull it together here, right? OK. With all that said, this guy, his name’s Huck, not his real name, but I’m gonna go for Huckleberry.

3:56
I’m gonna call him Huck Short, OK? Hey, Ryan. Huck here, I hope you’re doing well. I love your podcast and listen to it every week. That is awesome, man, and I appreciate that. I’m also writing you from Spain, so maybe I’m your furthest listener, already addressed that, got the dude in Australia.

4:12
Got a couple of guys in Australia, actually more than a couple. I think I got a handful of people in Australia. Anyways, you’re always sharing amazing tips, so big time gracias gracias gracias for that. I took 4 years of Spanish, 2 in high school, 2 in college, don’t know a lick of Spanish still. Olanuablo ingles.

4:30
I know that phrase because I don’t know how to speak Spanish. So somebody comes up to me speaking Spanish, it’s good for me to be able to say nuablongles because I think that means I don’t speak Spanish in one way or the other, I’m saying that. But he says, gracias, right? I said that right. Anyways, you’re always sharing amazing tips, so thank you for that.

4:48
I’m fairly new to trading and investing game. I got super lucky and realized last month I had a little over 3K sitting in a Fidelity account from a job I had many years back. Funny you say that. Way back in the day, I found 3K in my ex’s shoe. Don’t know what that was all about, but I later found out she was, she was planning other things.

5:06
Uh, all right. I’m not gonna get too much more into that. Totally spaced, it was there, don’t ask me how. So I decided to start learning and educating myself on investing. My question is, what is the general effect on stock prices when a company announces that they are going to have major layoffs?

5:22
That’s a good question. He goes ahead and gives me an example about American Airlines yesterday made an announcement that they’re going to have a likely furlough or layoff of 19,000 employees, good grief. The announcement came towards the end of the day, but I didn’t notice much of a drop in stock price. Obviously, it’s sad, press and really unfortunate for the workers, but at the same time, the company’s bottom line is helped out by having less labor expenses.

5:44
So is it normal for a stock price to take a dip, or can they have the opposite effect and bring the price up? Are those dips gains only short term? Thanks for the help, Ryan. I hope you enjoy a delicious cocktail while you’re reading this email. I am reading this email with a delicious cocktail.

6:00
All the best, Huckleberry. So, Huck. It’s, it’s a good question because here’s, here’s the thing about the bad news. The stock market works in ways we’ve never expected, right? Take what we have in the market right now. We have 33% decline in GDP.

6:16
I don’t know what it is in Spain, but I’m sure it’s negative as well with how the coronavirus has pretty much ravaged the entire planet. You got unemployment here in the United States of like, what is it, like 11%, 12%. I think at one point it was probably like 18, 17%. I can’t remember what the exact number was.

6:31
It was pretty high, about or 3 months ago. Now it’s like 10, 11% range. Then you got like social unrest, right? We literally have a war zone up up in Kenosha right now. And yet, what does the stock market do? It just keeps printing new highs. And it doesn’t even need all the stocks to keep going up.

6:47
In fact, all it really needs is Facebook, Netflix, Amazon, Apple, Google, or Alphabet, Microsoft, and, you know, now you got Tesla, you know, becoming part of the Fang gang, not in letter, but in spirit. So Tesla’s up like a ton today.

7:02
You have Facebook that’s ripping the face off of investors. You got Netflix. Guys, what in the world happened to Netflix today? It’s up 11%. I think I spent a good portion of my day just trying to figure out why was it up 11%. It was trading at like 5:10, 511.

7:18
I’m like, I’m not chasing this thing. No news. Crazy euphoria. We’ve got to be closer to a top than a bottom, yet it’s confirming a double bottom, but at this point, I’m chasing it with like a stop loss that would require like a 7-8% stop loss. I didn’t see the point behind it.

7:34
The thing goes up to like 5:48 by the end of the day. I’ll admit, I, I was a little bit surprised by what happened to Netflix there. It was a little bit crazy. And yet it was on no news. Had it been on news, I would have been inclined to take a trade-off, but it had one of its biggest moves in a very, very long time.

7:51
It was a crazy move. And Apple really didn’t do anything today, right? And when Apple doesn’t do anything, what happens, the other trillionaires decide to go ahead and march higher. You got your Google, you got your Amazon’s, Microsoft, they all, you know, carry the water for the market today. Russell was down.

8:07
You had decliners just going straight up versus advancing issues. Advancing issues were way down. Stock markets at all-time highs and the world has never been worse. Actually, I would probably say the United States hasn’t been ever worse. I mean, it’s got a lot of problems.

8:23
More division I’ve ever seen in my lifetime. I’m 40 years old, turned 40 last month. I’ve never seen this much division in my lifetime. I remember like the impeachment hearings for Bill Clinton. There was a lot of division there. Guys, that looked like a picnic compared to what we’re seeing today. Yet, the stock market’s at all-time highs.

8:39
Why do I bring up all this stuff? It’s because all this bad news out there, the stock market keeps going up. I don’t even know where people are getting this money except for like their stimulus checks that they were getting from unemployment, and then, uh, the stimulus checks that we’re getting for $1200 a person.

8:55
Now we’re talking about another round of stimulus checks out. I don’t know if Congress will ever get there. We’re in the middle of the election season. I have a hard time thinking we’ll see any major compromise. But all of that being said, that’s bad news. There’s a lot of bad news out there, and yet the market keeps rallying. We’re having a recycle 2018 phase one trade headlines about China in order to get this market moving again.

9:15
We got random vaccine headlines that are being rebutted by the next day, yet the market doesn’t lose any of its gains. So there’s a lot of weirdness out there in the stock market. So, you take that from a macro standpoint and how bad news can be good news, and then you take a company like Air American Airlines, and by the way, I’m long on JETS right now, and that’s an ETF on the airliners and the companies that produce airliners.

9:37
Yeah, American Airlines announced 19,000 possible layoffs. Why doesn’t the stock go down because it’s bad news, but it’s not bad news for the company necessarily. They’re reducing their overhead. Thing is, is when they actually get back to if they ever get back to full steam, if they ever get back to what they were like before the COVID ever ravaged the airline industry, they’re not going to hire all 19,000 people back.

10:01
No, they’re going to make people do less with more. Pilots will probably fly more. Airline attendants, they’ll probably do more flights. People that work in the terminals, they’ll probably do more bookings. So people will be expected to do more. It happened in 2008. Massive layoffs in 2008.

10:18
What happened? More people did more. They figured out ways to cut overhead by reducing the number of people that worked for them. And then when you’re in a good economy, people lackadaisically, kind of like hire people for positions that maybe only one person could do the job of what you’re hiring three people to do.

10:34
And it’s not necessary. I worked in the defense industry and basically, they wanted to hire as many people as they could just because they could get more money from the government on these cost plus contracts, right? But then when you start getting these layoffs, you start reducing your overhead because you have to start tightening the belt a little bit.

10:50
So it’s actually good news for the companies when they announce these layoffs. In the same sense, like what you’re seeing in the macro economy right now, you oftentimes see the market rally on increased layoffs. When the economy is actually worse than expected, the market will rally. Why is that? It’s because they’re so dependent on the Fed.

11:08
That the bad news will propel the Fed to want to do more for the economy. It’s a mess. It’s a messed up situation. It really is. It pisses me off a lot. I can’t tell you how much I hate the Federal Reserve. I think that is the biggest group of jokers that has ever been assembled, and yet they’re left unchecked.

11:27
They’re never audited, and they get away with whatever they want. If they want to give a bazillion dollars to Schmo, they can do it. Nobody’s gonna know, nobody’s gonna care. Nobody’s gonna check. Nobody’s gonna audit them. And it’s bull. It really is. I’d say the other word, but hey, I’m trying to be family friendly here.

11:43
So when it comes to trading, not all of the bad news that you expect will actually be reflected in a negative way in the stock price. I’ve seen plenty of times where a stock gets downgraded and it actually goes higher. Why is that? Half the time I don’t know.

12:00
That’s, that’s the honest opinion. Uh, it’s just the market does whatever it wants. It really does. Uh, it can ignore bad news when it wants to ignore bad news. That’s what you’re getting right now. It ignores bad news. It ignores bad news and oftentimes rallies on bad news, and it’s just the mode of what the stock market’s in.

12:17
Right now, the stock market is in the mode of rallying on everything, everything. And you wanna know what’s crazy? And maybe I’m getting off on a little bit of a rant today and you’re like thinking, man, you made the whole podcast just about this today and maybe yes, I did, OK? Because about the layoffs about bad news being good news. But I’m gonna divert a little bit here.

12:33
I got a phone call today. He says, Ryan, this is a friend of mine. He says, Ryan, I don’t know what the heck, what’s going on here. My mom, she’s like 70 something years old, right? My mom and my brother just told me that they put all their money into Apple and Tesla. And I’m like, holy cow, like, literally like today he’s like, yeah, they didn’t even say anything to me about it.

12:51
They just went ahead and did it because they’re worried that they’re missing out. I’m like, oh my gosh. And then, you know what’s crazy? It’s a microcosm of what all the other emails are right now. If you look at my YouTube channel, anytime I talk about Apple and Tesla, these people are buying in at like crazy prices right now.

13:07
It’s nuts to me to buy Tesla over $2000 at this point. I know friends who bought into Tesla at $200 to $300 a share, and they’re like, this is crazy. I thought maybe we’re talking like years from now, I would reach these kinds of prices. And he’s almost mad that he didn’t get to add up.

13:25
More because he was continuing to add to his position over time as it was down to 200 and 300. It’s at 2000 now he’s like, no way. So with all that said, everybody’s ignoring it. It’s the same reason why Grandma gets in the stock market. Does she care about GDP contracting? No. Does she care about record unemployment? No. Does she care about social unrest? No. Well, maybe she cares about social unrest.

13:40
I mean, I think that’s more of a personal thing, right? But nonetheless, what I’m trying to say is she doesn’t care about social unrest as it pertains to the stock market. And so if you don’t care about social unrest, you don’t care about the GDP, and you don’t care about the high unemployment as it pertains to the stock market, let me just clarify that.

13:57
Don’t want to get anybody’s panties in a wad. What happens is that the market just goes up. It’s not just these people that are doing it. It’s society as a whole. It’s your banks, it’s your algos. They ignore the bad news. In fact, the bad news when you get those intraday drops on something like, you know, bad China press headlines.

14:15
If you get it on the fact that Congress cannot pass a stimulus bill that we were rallying on for weeks on end, saying that we were going to have a stimulus bill. We didn’t get it. Market didn’t do anything in terms of like pulling back at all. Why is that? Because it ignores it. Bad news is good news in this kind of a market.

14:30
And so American Airlines, maybe if they had announced back in February, late February, early March, that they were going to lay off 19,000 people, the stock market reaction would have been a lot different. So, it’s really about the timing of the decisions. That’s a huge part of it.

14:47
If you time the announcement right, if you make those layoffs at the right time, market can oftentimes ignore it. So it really has to do a lot about the overall macro environment in the stock market. So that’ll do it for this episode today. If you guys have any questions, feel free to email me. Please keep sending me your questions, your stories.

15:04
I like using them for my podcast. It is the best way for me to respond to you and to also benefit the most amount of people in one setting. Keep sending me your stories. I love your stories. I know that some of you guys are wondering if I’m ever gonna get to you guys. Believe me, I will.

15:20
This particular one here, I just got, I went ahead and used it because it was pertaining to a current event. But send me your questions, send me your concerns. I want to use them on the air. I will continue to do these podcasts as long as I get these emails, so keep sending them away. More than likely, I will do yours.

15:35
Hey, and before I forget, go onto the Apple store, go onto your podcast platform that you’re listening to me on. Make sure you subscribe and also make sure you leave a good review. It means the world to me. It really does. I check them. I read all of the reviews. I really appreciate it when you leave a good review for me.

15:52
It means a lot to me. So please go ahead and leave a good review. If you like it, of course. But, uh, if you listen to this much of the podcast, I’m assuming that you liked it. It means a lot to me. Thank you guys. God bless you all.