Ford and Rivian enter the friend zone

November 22, 2021 Ford and Rivian enter the friend zone Good morning traders, Welcome back to The Daily Setup. The Nasdaq closed at a new high Friday while the Dow and S&P dropped on the day thanks to covid concerns. Here’s what’s on the docket today: - Footlocker beats earnings but drops during trading - Ken Griffin of Citadel buys a copy of the US Constitution (yes, you read that right) - The House passes the Build Back Better plan So have a cup of coffee, give us a read, and let’s make this short week a good one. FYI: You won’t be receiving The Daily Setup Thursday or Friday as we’ll be taking time off to stuff our faces, watch football, and listen to our families argue, just like the rest of the country. Jeff Footlocker, Boeing, and the BBB plan BIGGEST MOVER Foot to the Face Investors gave Foot Locker (FL) a swift kick to the nether region during Friday’s trading session. Shares of the athletic footwear chain [tanked 12% on the day]( but are still positive on the year to the tune of [+24.3%](. Ten-year-old me would think it’s super cool I’m writing an article about his favorite footwear store. Forty-three-year-old me is shocked that Foot Locker stores are still a thing. - Despite announcing earnings that beat analysts’ estimates on the top and bottom line, [CFO Andrew Page said]( that the company “expects global supply chain constraints to persist throughout the fourth quarter.” Oh, you mean the quarter that usually generates the highest sales for retailers? Yeah, not a great way to get investors amped to buy your stock. - The company reported [Q3 earnings]( of $1.93/share on $2.19B in revenue vs. FactSet’s estimates of $1.37/share on $2.15B in revenue. - Foot Locker also completed their combined $1B [acquisitions of WSS and Atmos]( during Q3, which should help to bring in additional revenue streams. Food for thought: a little Chicken Soup for the Trader’s Soul: Foot Locker’s stock traded between $45-$50 from the end of September until the beginning of November, before climbing to the near-term high of $57.76 before the earnings release. Friday’s trading session puts the stock right back at the upper end of that range. I plan to keep FL in my watchlist to see if sellers continue to press the stock down towards the $45 level in the coming weeks. Lowered Expectations, Still Disappointed ^[A live look at Boeing and its investors]( Boeing (BA) investors continue to be Charlie Brown, always trying to kick the football that Lucy (Boeing itself) is holding, believing that this time will be different. Time after time the company moves the football and investors find themselves ass over teakettle and staring up at the sky wondering what happened. This time around, [BA]( dropped 5.77% Friday on the heels of yet another delay in the 787 delivery timeline. - The aerospace company is slowing down the [production cycle of the 787]( due to production quality issues, which is just what you want to hear out of a company that makes metal tubes that transport people at 30,000 feet off the ground. - Management was unable to give a timeline when production should normalize, partially due to the FAA having to sign off on any quality remedies. - This is just the latest in a series of stumbles BA has made in recent years, like the ongoing issues in [getting the 737 MAX]( back into the skies. Boeing is fortunate to operate as half of a global duopoly, which may give Wall Street some comfort in their ability to right the ship... err, plane. Just as a matter of common sense, traders should weigh any possible rebound opportunities against the potential for management to pull a Lucy on them. Good grief. Return to sender [Mail GIF - Find & Share on GIPHY]( ^ The Senate when they send BBB right back to the House The House of Representatives passed Biden’s massive $1.7T Build Back Better infrastructure bill on Friday. If that makes it sound like something’s actually happened, don’t worry-- now the bill is headed to the Senate, where it’ll almost definitely be modified and bounced right back to the House again, prolonging this agony indefinitely (or at least until Christmas). - As it stands, the bill includes child care subsidies, expanded Medicare coverage, universal pre-K, and a one-year extension of the enhanced child tax credit, as well as $550B for green energy initiatives. But Chuck Schumer would need [all 50 members]( of the Democratic caucus to vote in favor of BBB for it to pass as-is, which-- spoiler-- is not gonna happen. - Reason 1: goblins Joe Manchin and Kyrsten Sinema hate [paid leave for American workers]( and [proportional taxation for the rich]( and the current version of BBB would support both of these developments. Reason 2: Comrade Sanders feels BBB isn’t progressive enough now that it includes a provision [raising the tax deduction cap by 800%](, a measure designed to help rich Americans. Can’t win with these people. It’s very likely that BBB will be sent back to the House, and if that happens, the bill could end up dead in the water. That’s because another House vote would involve Republicans again, and minority leader Kevin McCarthy is hell-bent on getting his party to move against the bill (see the [eight-and-a-half hour overnight “speech](” he gave just to stall the vote). If that happens, stocks that have surged from the plan’s recent successes (CAT, concrete, and construction ETFs) could dip to pre-BBB levels or even lower. National Treasure Part 3? Crypto Corner Last week a group of strangers from around the world banded together in an attempt to buy an original copy of the United States Constitution, only to be foiled by a billionaire. It sounds bizarre, sure, but is it really any less convoluted than the plot of [Face/Off](? Sotheby’s [hosted an auction]( to sell one of the only known copies of the Constitution that’s not in a museum or national archive and one of the main bidders was a collective of approximately 17,000 people called ConstitutionDAO. - A DAO is a Decentralized Autonomous Organization who use the internet and cryptocurrency to make governance decisions. ConstitutionDAO was born in just the past week and came together via contributions made in ETH, the native token of the Ethereum blockchain. - The DAO raised $49.5M in funds, but the winning bid was $43.2M and the DAO ran out of bidding firepower when auction fees, storage, transportation, and insurance costs were factored in. - The winning bidder [was Citadel founder Ken Griffin](, the antagonist of the WallStBets community and basically a stereotypical billionaire villain from an 80s movie. The optimistic outlook holds that DAOs are a viable structure for decentralized communities to come together and achieve objectives using cryptocurrency. The pessimistic outlook, for auctions at least, holds that when you know how much your counterparty has to bid with, winning auctions just got a lot easier. ETH seems to be the early leader in DAO use cases however due to its smart contracts capabilities. You Will Always Be My First Rumor has it ^-Rivian to Ford…probably Ford (F) and Rivian (RIVN) put each other in the friend-zone on Friday. Both companies confirmed rumors that they will [no longer co-develop an electric vehicle](, but Ford will still retain a 12% stake in the startup EV maker. In 2019, Ford invested $500M in Rivian, which as of Friday’s close was worth roughly $13B as a result of RIVN’s IPO ten days earlier. In case you missed my writeup on November 12th, which I’m sure you didn’t because you’re smart, and smart people read The Daily Setup, Rivian’s stock price skyrocketed nearly 30% on its first day of trading. This put [Rivian’s market cap at $125B]( or approximately $50B more than Ford’s. $F dropped 0.87% while $RIVN gained 4.23% during trading. So, why the split? Here’s a few reasons: - Rivian needed Ford’s investment to get off the ground, and after the company’s IPO, now has plenty of cash to start manufacturing independently. - Ford is in a better position to develop its own EV’s than it was a few years ago. [Car and Driver magazine named]( Ford’s Mustang Mach E the electric vehicle of the year in July. - The companies will still be friends though as Ford’s subsidiary, Troy Design, will move forward with providing parts for Rivian’s R1 vehicle. As the likes of Ford, GM, and the rest of the old guard continue to pour more resources into the production of electric vehicles, the stock growth between them and startup EV producers like Rivian should narrow. That said, investors are clearly favoring the startups at this time. The one thing that Ford and other established car makers have going for them is not only name recognition, but the ability to actually manufacture and deliver vehicles to customers…I’m looking at you Nikola and Lordstown. I intend to keep RIVN and F in my watchlist as there may be a strategy moving forward to go long the Fords of the world and short the startup EV market as a hedge. For me, I’m just glad that the two companies were mature and decided to end their relationship like adults rather than just ghosting one another. Link Roundup 📿 Other News Other News Link Roundup - [Care for some booze with your Beef & Cheddar? Arby’s has the meats – and, now, the vodkas]( - [Deutsche Bank, Dutch leader – DB (not a BB) brings on Alexander Wynaendts as Chairman]( - [Student Driver – Apple’s latest play in autonomous vehicles could double its revenue,]( - [EV producing companies are avoiding Cobalt batteries, just like Americans avoided driving the Chevy Cobalt]( - [Bumble stung by weak earnings while Tinder catches fire]( [Image] RagingBull, LLC 62 Calef Hwy. #233, Lee, NH 03861 [Unsubscribe from all RagingBull emails]( Questions or concerns about our products? 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