Howdy folks. Ask me anything.
Q. Cody, I have a question about your investments in gold coins. Do you completely rule out a history-repeating-itself scenario of the government deciding to confiscate the gold held by private investors by obligating them to sell all their gold (other than some small amount of jewelry) at some fixed price? After all, that’s pretty much what already happened in the 1930s when FDR mandated exactly that. If push comes to shove and things turn out really ugly, what would prevent the government to pull that trick once again? It appears to have worked before…
A. Man, that is a great question. And no I certainly do not completely rule out a scenario of the government trying to confiscate everybody’s gold like FDR did. Unfortunately, if the Republican/Democrat Regime decides to confiscate your gold, your checking account will probably already have been confiscated in a “Bail-In” to save the TBTF banks. That’s why you have to not just buy gold, but also silver, a little bit of BitCoin, etc. All that said, if the govt gets to the point of confiscating gold like FDR did, the society, economy, and market itself will already be in a dire place.
Q. What’s your take on gold down here? The GLD retested the 131 levels and with the idea that QE may be coming off the table? If the printing presses stop do inflationary tendencies decline or do you not see gold linked that way?
A. The inflation that is already spiking right now in the real-world and is going to get much, much worse before the FED decides to address it, is still very much going to happen. There is no stopping the terrible economic outcomes from the terrible misallocation of capital that the FED has been juicing for five straight years now. They will be toooo late when the finally react to inflationary pressure. Just like they always are. I would be a huge buyer if and when gold/GLD takes a big hit on the idea that the FED can somehow put the genie back in the bottle. Humpty dumpty has fallen and he can’t get up! Ha.
Q. Hi Cody. Today I have a question and a suggestion 🙂 So several months ago, I think around January, when I asked in the chat about bitcoins you replied something approximating a thought they were not quite ready for prime time. Since then, I’ve noticed that you accept bitcoins and feature them in the currency wars link. So my question is, did you change your mind and if so what led to the new outlook. The request/suggestion is that you have some kind of room where members can post their favorite investment picks, and maybe offer a prize to the one with the best picks (like say perhaps a free subscription or maybe a link on Wall Street Allstars). I’m obviously self interested here 🙂 , since I made about 5X my money on my bitcoin pick and have done well on other ideas last few years, but I do think something like that might be a fun addition to your site.
A. Yes, I changed my mind on BitCoins because the global currency wars spiraled out of control earlier this year, right after you asked me about BitCoin back in January. I do think it is a good idea to put like 0.5% (that is 1/2 of 1%) of your portfolio into BitCoins, because if they end up becoming a de facto currency in the digital economy, you’ll make 100x your money on them. If not, you lose 0.5% of your portfolio on them. And I LOVE YOUR IDEA of a TradingWithCody Subscriber Picks Room. Let me work on designing the page and we’ll get back to you.
I am actively analyzing and learning and figuring out BitCoin’s place in our Brave New World Order, but as I’ve written before: “BitCoin is a Ponzi Scheme: The Internet Currency Will Collapse – Most serious investors and traders are writing BitCoin off as a bubble or a scam. I’m leery that this first attempt at a global private currency is not well-enough protected and centralized. But to write off the whole idea is to miss an incredibly important economic development of our time.”
Q. Cody, are there catalyst we should be looking for in June that would ignite Tech (Apple, Google, FB, AMZN)?
A. Hmm. I just think the market is so extended that unless it continues to defy gravity, the path of least resistance is soon to turn downward. That said, if I had to pick the near-term order of those four stocks, it’d be: AMZN, AAPL, FB, GOOG, in that order for the near-term.
Q. Cody, many of us remember those (usually) quick and usually large wins that you identify when a heavily-shorted company finally declares bankruptcy, the stock craters, we get in and play with the quick bounce. hope you’re still on the lookout for those — but more importantly — are their sources/sites that attempt to locate opportunities like that — i.e., companies in real trouble and heavily shorted, etc. — so we can research this on our own? Thanks.
A. I’ve been looking for a good central site on stocks that go bankrupt, but haven’t been able to find one. And if you’re asking too, that means there’s probably a business opportunity to provide that info on a daily basis. I’ll see if I can design a page to do that for us here at TWC. I have seen a couple Bankruptcy/short-covering trade opportunities in the last few months, but I didn’t like the set up or the company enough to pull the trigger. Most of them did work out if we had done the trade though. I’ll certainly let you know anytime I am going in for a BK trade.
Thanks for your answer.
Q1. And while you’ll be addressing FB, everywhere I look I see negative signs on their growth and their use — all of which translates into bad news no matter WHAT they do to monetize. Teens seem to be abandoning it (acknowledged in their ER); generally I and my “Friends” (decided NOT teens) are using it less; FB Home so far has proven people don’t love/want it THAT much in their lives; and the clutter/experimentation of the site continues to confuse/confound people (personal opinion, but I think I’m not alone). Is there any chance, as big as they are, that they could suffer the same fate as a MySpace? Or are they — god forbid — TBTF?
Q2. Is wall ST just not understanding FB and the reach and power in monetizing its near 1.2 Billion users? The stock popped to 29.25 after earnings and has slid 15+ % ever since then?
A. Yes, there is always a chance that FB ends up as another worthless MySpace type of web site. But I think FB has already hit critical mass and is innovative and broad enough that there is a $100BB valuation ahead in its future. That would put the stock over $50/share. But it could take a year or two for all that negativity around the company’s fundamentals to shift to positivity. The market is the final arbiter of trading and until it recognizes the future earnings growth, monetization and value of FB, the stock will be called “overvalued”. Remember that FB simply needs to generate 5 cents per day per visitor and it would generate $18 billion a year in sales. I think that is a do-able number.
Q. Are you a buyer of FB here at 25 after you sold at 29?
A. I don’t think I’m going to add to my FB until the market crashes/pullback sharply next time. Patience for now.
Q. Hi Cody – Analysts have lately been touting 3D printing companies. Do you have any thoughts on XONE? Thank you.
A. I think we probably need to go ahead and buy a small amount of all three major 3D printing companies and then let them ride for the next five years. Maybe a 1% of the portfolio into each stock. XONE, SSYS and DDD.
Q. Cody, what do you think of Corning (GLW) here? Its been moving up as of late.
A. With a 2.5% yield and a low P/E, there’s upside to GLW to $20 or more if they can deliver some growth and increase the dividend payout.
Q. I see that you sold a portion of FSLR about a week ago just below this level. Markets continue to inflate and it feels like the boat has sailed. Is it too late to initiate a position in FSLR? Would you recommend buying any at this level?
A. If FSLR works out like I expect it too, it’s not too late to get into it. But start slowly and buy a small tranche for now to get your toe in the water. Add to it next time it tanks for whatever reason. And then add a little more over time.
Q. Hi Cody, Glad you are back! I wanted to ask you about two stocks, DATA which just had their IPO last week. Something to do with the cloud. Also, what do you think of DXM? Kyle Bass has come out saying he likes them very much and has a large stake in the company. Thanks in advance…
A. Thanks! It’s great to be back! I don’t know enough about DATA and its prospects for next year or two to give you a good answer yet. Will look at it though. DXM has more than $1BB in debt and only $100MM in cash. I don’t like it at all. Not a growth business in any case and never will be again. Phonebooks ain’t coming back.
Q. Hi Cody! Glad to see that you are back and had a safe trip. What do you make of HPQ? It seems to me like they might be getting a little desperate by touting that they are now joining the Android bandwagon and are going to focus more on what the “consumers want” by way of their market research.
A. I think you’re right that the HPQ trade is probably just about over to the upside. That said, if they earn the $3.50 they say they will, the stock ain’t expensive at $23 today, so it could go higher still. It’s a good enough company and too cheap right now for me to want to short it though.
Q. Apple supplier CRUS is selling off today. Is this an opportunity for a rebound when Apple recovers?
A. CRUS has nearly $3/share in net cash, they should earn $2.50-$3 this year even with the lower margins that the CEO said the company will be facing in future years. Every chart you look at for that stock looks horrible too. And that might actually be a good thing since NOBODY seems to be wanting to buy this thing at $18 even as every growth manager was loaded up on it at $40.
Okay folks, that’s another great Q&A session! Thank you. Great to be back in the saddle here. I am going to go eat some NM Green Chile now. Sushi when on the coast. Green Chile when in NM. Do as Romans do when in Rome, you know?
Nah — some great Mexican when you’re on the coast.