I was writing a post last week that involved the Rocket Companies (RKT). I knew RKT, successor to the Quicken companies, was the largest mortgage originator in the US and I also believed (correctly, as it turns out) that RKT has a very complex capital structure that would be outlined somewhere in the 10K available on the SEC EDGAR site.

I didn’t have much time, and I worried that I might have to dig through a bunch of material scattered through the filing, complying with legal disclosure requirements but requiring a lot of work to see the true structure of the firm. So I thought I’d ask Chat GPT.

Big disappointment. What I got was a selection of financial newspaper/website articles, whose authors, however sincere, and displaying a wide range of writing skills, had close to no knowledge of finance or of the stock market.

Just before beginning this post, I went to the EDGAR site, anticipating staying a while. The most recent entry was the kind of stuff I’d hoped to avoid, in an 8K from earlier this month:

“On September 8, 2023, Rocket Mortgage, LLC (the “Company”), a Michigan limited liability company and indirect subsidiary of Rocket Companies, Inc., as guarantor, RCKT Mortgage SPE-A, LLC, as seller and Bank of America, N.A., as buyer, entered into Amendment No. 4 to Amended and Restated Master Repurchase Agreement (“MRA Amendment”) and the related Transaction Terms Letter for Amended and Restated Master Repurchase Agreement, which extended the expiration date of the existing Amended and Restated Master Repurchase Agreement dated as of June 29, 2021, as amended, by and between Bank of America, N.A., as buyer, RCKT Mortgage SPE-A, LLC, as seller, and the Company, as guarantor (the “Master Repurchase Agreement”) from May 4, 2024 to September 8, 2025. No other material terms of the Master Repurchase Agreement were changed.

The foregoing description of the MRA Amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to the full text of the MRA Amendment, a copy of which will be filed with the quarterly report on Form 10-Q of Rocket Companies, Inc. for the period ending September 30, 2023.” Welcome to financial companies. Good to know, I guess.

Then I opened the most recent 10K, filed on March 1st. There in plain sight on page 4 was the business overview, explaining that RKT consists of nine businesses: Rocket Mortgage, Amrock, Rocket Money, Rocket Homes, Rocket Loans, Lendesk, Rocket Mortgage Canada, Rocket Central, Core Digital Media.

There are brief descriptions of each, which I’ve omitted.

I have two points:

–the answer I got from AI about RKT was is instance of GIGO (garbage in, garbage out). Inconvenient for me, but not a huge surprise. (A friend who’s worked with AI for twenty years has told me it’s a mistake to think AI tells the truth.)

–what if GIGO becomes the norm? How does this change one’s approach to investing?–my idea is I should act on knowledge I think you have, but not many others do, and wait for the world to figure it out. On the one hand, there may be greater opportunities with AI spewing out suspect answers to queries; on the other, it may take longer (much longer?) for the market to realize the truth and act.