NCI: Eric Jackson: How Social Media Transformed Investing

NCI_Eric Jackson: How Social Media Transformed Investing

Speaker1: [00:00:00] Welcome to Non-Consensus Investing. I'm Rahm Aal, your host, and CIO at Lumida Wealth, where we specialize in the craft of alternative investments. At Lumina, we help guide clients through the intricacies of managing Wealth so they don't have to shoulder the burden alone. Through this podcast, we draw back the curtain to reveal the strategies of F Floyd by the best in the business for their clients so that you too can invest beyond the ordinary.

Alright, welcome to the next episode of Lumina Non-Consensus Investing. I am pleased to be hosting Eric Jackson from EMJ Capital. Eric was featured in Bloomberg two weeks ago. He has been outside Drake's his neighbor, a house with a billboard. I think it's like day 89. We'll get into this in a moment and highlighting his stocks back in the day, 20 years ago.

Or I guess 40 years ago it used to be the hunger strike is how you got attention. Now in the age of the modern [00:01:00] influencer, you walk in front of Drake's house. So we're gonna talk about how social media has transformed investing, idea generation, underwriting approach, meme stocks. Are they good or are they bad?

We're gonna talk about Eric's background too, and your ideas. We're both investors in Better mortgage, uh, as well. We're gonna talk about how you got Keith back on the board of Opendoor. There's a mix of social media and activists going on there, so a lock it into Eric. Thank you for joining. Let's start off with Drake.

So. How did you get in front of Drake's house? And by the way, it's gonna start getting cold now too. Fall winter. 

Speaker2: It was 48 this morning. It was day 59 this morning. You noticed, huh? Yeah, I actually wore flip flops 'cause Okay. 

Speaker1: Canadian flip flops. 

Speaker2: Those, the elements. I do, I typically do these and now it's 7:00 AM That's been like my, and today I had a guest, like from, it was like a walk and talk.

Now I've done like three of these where, and the two of the three have [00:02:00] been students who've asked that to come and meet me there and walk along and talk to them and stuff. We got some good feedback on the, on the first student, so had a second one today. So it was, 

Speaker1: when you say student, do you mean a student like a, from a, you you're teaching a class or they, 

Speaker2: no, today was a guy from a University of Toronto, so he's like the second last year of college.

I'm trying to remember his name. Sure. Pro Val or something. It was his name. Anyway, and then it was earlier this week, it was another university student from, uh, from Montreal. He happened to be in town. Like for the weekend. And so he asked if he could, he knew someone who I had met who was a member of the Open Army down in New York because uh, he is a football running back and this other guy used to be a running back for the Falcons last year, Atlanta Falcons.

But now he is like rehabbing and so he is like trading stocks and he has like a faith-based podcast that he's using to build up. So anyway, it's six degrees of separation type of thing. And [00:03:00] people definitely the younger generation are a strong constituency of both the open Army and now what I call like the bigger rising dynasty is the term I use to describe.

The movement of people that who are supportive of Opendoor, but like some of these other stocks like better and several others because it, I think it's just bigger than Opendoor itself. And I think part of the retail movement that we've been able to build up over the last few months is there's some commonalities in them and it crosses geographies, which has been surprising to me, like it's all over the world.

But it seems to be like there's a middle class out there who is very hungry to improve their lot in life financially. And they see stocks and stock investing as a way of doing that, not as a get rich quick type of scheme, but a leg legit. There are legitimate opportunities in the stock market for 10 x-ing your money.

2050 x-ing, [00:04:00] hopefully a hundred x-ing, and that would be life-changing Wealth, generational Wealth for a lot of people if they hit on just one open door, one Carvana. Carvana is like the poster child here for. 

Speaker1: And that was your first using of social media to highlight this opportunity? First time? 

Speaker2: First time at first a hundred x kind of an opportunity.

Okay. 20 years ago I was involved in a social media campaign against Yahoo and I spent like 10 years of my life like banging my head against the wall with dealing with the Yahoo board. That was like the epitome of the sleep at the switch and that as they cycled through five different CEOs, the MRSA mayor being the last one who drove the company straight into the ground and then popped up and claimed victory for it, passing off the keys to Verizon to take it over.

So I've had experience with social media and I know that you wanted to touch on that. Yeah, definitely. But the Carvana was, was a case of a stock that went from $400, like in 2020 down to [00:05:00] $3 and 50 cents, and in December, 2022, and then came all the way back to recently it was like as high as $413. I think now it's pulled back to 3 50, 360, something like that.

So it's, but that, like I, I was an early, kind of a long, I guess in that comeback, like my, I was, I had an AI model and kind of a, a nascent AI model that flagged it at 11 bucks. A share in May of 2023. And so I wasn't sure that the model was right. So I asked the guys working for me at the time to check it over because it said this should be like the number two long position in your portfolio.

And so a week later they came back and they said, no, yeah, it's accurate. You should go all in on Carvana. And by that time it was $15 a share. And uh, so I did go make it a significant position. And then a couple weeks after that I got invited to be on CNBC talking about Tesla. But I ended up like steering the conversation halfway through the interview towards the direction of why I thought AI is [00:06:00] gonna revolutionize hedge funds as, as well as every other industry.

And you know how my new AI model had flagged Carvana and why? I thought that was interesting because I thought if I was a typical guy at a typical hedge fund who had 20 something MBAs working for me. I on a, like a Monday morning meeting, I doubted that someone would have the kas to bang the table and say, we gotta go all in on Carvana because they, for career suicide concerns and all this kind of stuff.

And yet the computer doesn't care. The computer just wants to give me the best energy. And your 

Speaker1: AI model, can you, was that GT five plus a prompt and a data source, or what was this AI model? 

Speaker2: The model was based on gradient boost boosted machine. Oh, it's a real 

Speaker1: machine learning algorithm. Yeah. 

Speaker2: Yeah. So it's like a machine learning.

It was a much more technically driven model that particular, that first iteration of the first call. Got it. Yeah. So it was going off of things like capitulation volume [00:07:00] signals, was it, what's the, what's the ideal like. Like moving average for Carvana, was it above the moving average? Oh, I see. And then, and that's a different moving average than the one that works best for Apple, things like that.

So there were like a bunch of technical signals that were firing off saying that Carvana had just recently moved in this sort of upswing and that you should take a position. Since then, we've played around with all different kinds of other features to build our models with. We have like more fundamentally driven features, insider buying, insider selling, social media activity, option models, earnings models, crypto models and stuff like that that are more macro models.

So we, which we threw a lot of spaghetti at the wall subsequent to that first Carvana model. And a lot of this stuff didn't work or didn't work well, and I had a lot of choppy performance in some great, like 40 up 40% months and then followed by down 60% months. That's called 

Speaker1: auto sample testing of the [00:08:00] model past.

Yeah, 

Speaker2: it was, so earlier this year I was getting, I, I suffered like a huge withdrawal at the end of 2022, where like this billionaire who had given me my start 10 years ago, basically redeemed out of the fund after a down 21 and a down 22 because mm-hmm. Before then I'd been more like of a fundamental, like bottoms up stock picker focused on growth tech companies.

So I was like, made a lot of money on Twilio and Roku and Carvana, like in, in the 2017 to 2021 stage and had done really well. But then all those companies got murdered in 21 and 22 and I was like too heavily weighted to them. Had too many options in those kinds of names and had a brutal two years. And so the billionaire said, thanks a lot, I'm redeeming out.

He was like 99% of my age at the time, and it's like I was, I always dumbly, always thought like he'd be in my back pocket and he'd be with me through thick and thin, like a marriage or something. But everybody, everyone makes their own choices and stuff. [00:09:00] So he was gone. And so then I had to scramble around figuring out what, what my go forward strategy was gonna be.

And I had all these expensive people around me. I was paying money to like lawyers and Cayman's fund directors and other people basically telling me I had to shut down and it wasn't, I wasn't viable anymore. And I had this like spotty track record that I'd never raised money with again, because nobody wants to invest in kind of an up and down track record.

So I should just like close, close my shop and then wait six months and then pop up again. Start a new fund where I didn't have to show my like spotty track record. 

Speaker1: That's what most people would do. 

Speaker2: Yeah, that was, that's like the game load, right? The road for most hedge funds. I didn't wanna do that, so I just bumbled along and I was building all these models in these last two, three years.

And then earlier this year, I like. I don't have it like endless wallets to keep paying all these engineers. So I was like, guys, we've gotta stop doing eight different models and just let's like focus on the two that show the most promise. And one was a crypto model and [00:10:00] one was this a hundred bagger kind of model that we had used with Carvana and that we tried to iterate on since then.

And so for the main hedge fund, we're doing the a hundred baggers. I have a new crypto Treasury company that hopefully is gonna start trading in a month or so. And so that, that's gonna be where the crypto models live. But that's a position we took early this spring. And then we, our first two ideas out of the gate with the, for a hundred future a hundred baggers was iron and cipher, which I took positions in, I think it was in late May, early June, and then announced 'em on Twitter.

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