• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing

Kass: Will the Robinhood IPO Represent the Stock Market Top?

When we combine the poorly placed HOOD IPO with the startling miss and guidance markdown in Amazon, the stage seems to be set for a correction.
By DOUG KASS
Jul 31, 2021 | 12:30 PM EDT
Stocks quotes in this article: HOOD, COIN, AMZN, MSFT, FB, AAPL, NFLX, SPY, QQQ, ARKK

History rhymes, but this time Robinhood (HOOD) stole from both the rich and the poor. 'The Robinhood Market Top' may be in and a -5% to -10% market correction seems to be a reasonable expectation now.

The IPO reminds us of the previous April 2021 direct listing of Coinbase (COIN) (top in cryptocurrency prices) and the LaBranche IPO (top in the markets) in July 1999

And, I view the Amazon (AMZN) miss as very important to the markets.

""You know somethin', Robin. I was just wonderin', are we good guys or bad guys? You know, I mean, uh? Our robbin' the rich to feed the poor."

- Little John

I see the Robinhood Markets IPO as possibly marking a highwater mark for retail trading as well as potentially representing a 2021 top for the entire market - much like:

* The Coinbase Global direct listing marked the cyclical peak in the price of digital currencies back in mid-April, 2021 (when Bitcoin traded at about $61,500)

* The less than memorable MF Global 2007 IPO (spun out of Man Financial) represented a soon to peak market and led to the single most significant downturn in trading activity and one of the largest bear markets ever.

* The second half 1999 IPO of specialist, LaBranche & Company preceded the second most significant correction in modern investing history.

According to the Business Media Everything Was Coming Up Roses for Robinhood

Once again the business media failed us and let investors down as the discussion and interviews leading up to the Robinhood Markets IPO were superficial at best, harped on the personalities of Robinhood's leadership and materially failed to discuss or analyze the flaws in Robinhood's business model (the outsized role of options trading, etc.) or in the obscene market valuation of the IPO (which was priced at $38/share).

Importantly, it is only after the fact (as the IPO fell in price from $38 to $34) this morning - that Fin TV has begun to remind investors of the risks to the Robinhood business model. As always this reminds me of Warren Buffett's famous phrase:

"Investment wisdom is always 20/20 when viewed through the rear view mirror."

The Church of What Is Happening Now Has Begun to Lose Its Congregation

For several months (See "Code Red" and "You Can't Handle the Truth") I have been cautioning about the narrowness of the market advance, the deterioration in breadth, the unhealthy dominance of FAANG plus M(SFT) (MSFT) leadership and many other technical indicators that were signaling trouble ahead.

As always I offer up one of Bob Farrell's Lessons of Investing:

"Markets are strongest when they are broad and weakest when they narrow to a handful of blue-c

Practically speaking, I am currently short three constituents of FAANG + M (which I have recently traded from the short side) - Facebook (FB) , Apple (AAPL) and Netflix (NFLX) .

Though I was not short Amazon, I issued a clear warning about the 2Q2021 prospects for the company on Wednesday morning when I wrote:

Jul 28, 2021 ' 09:35 AM EDT DOUG KASS

A Cautionary Word on Amazon

(FDX) and (UPS) fell mightily - each declining by about -$15/share - yesterday despite strong top and bottom line beats yesterday.

While the companies' business-based lines were robust - the consumer-based results were weak relative to expectations.

This could put some near term pressure on the shares of Amazon (AMZN) which were -$73/share in Tuesday's trading session.


As a direct result of these concerns I established and added to my Index shorts in (SPY) here, and (QQQ) here, and Facebook, here.

Bottom Line

When we combine the poorly placed Robinhood IPO (of course Cathie Woods' ARK Invest (ARKK) purchased over one million shares) with the startling miss and guidance markdown in Amazon (the first in over three years) -- the stage seems to be set for the correction I have been looking for.

Indeed the correction could be deeper than the garden variety 5% drop that I had previously expected.

Robinhood was an attractive and cool personality but Little John was a "bear" of a man.

(MSFT, FB, AAPL, and AMZN are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

(This commentary originally appeared on Real Money Pro on July 30. Click here to learn about this dynamic market information service for active traders and to receive Doug Kass's Daily Diary and columns from Paul Price, Bret Jensen and others.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Doug Kass was Short FB, AAPL, NFLX, SPY (common, calls and puts), QQQ.

TAGS: IPOs | Economic Data | Economy | Investing | Markets | Stocks | Trading

More from Investing

You Know What They Say About Dull Markets ...

James "Rev Shark" DePorre
Aug 18, 2022 4:37 PM EDT

Don't short 'em. Let's look at how investors responded to the thin trading and lack of big news -- and what we can expect to come.

With Oil, Keep Your Eyes on the Prize by Focusing on Supply

Jim Collins
Aug 18, 2022 3:59 PM EDT

The earth's oil supply is only going in one direction -- down -- and here's what that means for investors.

I Dislike Blue Apron But Here's a Trade, No Strings Attached

Mark Sebastian
Aug 18, 2022 2:30 PM EDT

The company is never going to make money and is likely heading back below $3 a share.

Europe's Recession Is All About Gas

Maleeha Bengali
Aug 18, 2022 1:30 PM EDT

Prices could very well stay elevated for a long time despite the economy going into a manufacturing recession.

The VIX and SPIKES Have Similarities, But There Are Meaningful Differences

Mark Abssy
Aug 18, 2022 12:00 PM EDT

And if you feel that volatility is an asset class that has a place in your strategy there are 2 funds that may be worth a closer look.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:23 PM EDT STEPHEN GUILFOYLE

    We're Cleaning Out This Retailer From the Bullpen

    Check out the latest moves in TheStreet's Stocks U...
  • 10:24 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    To Improve Your Trading and Investing, Spend More ...
  • 08:44 AM EDT PETER TCHIR

    CPI Beats Expectations, But Maybe Not the 'Whisper'?

    Slightly better-than-expected inflation across the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login