Time to do some more nibbling into what is becoming a panicky sell-off Mini-Me Crash. I’m nibbling some Ambarella AMBA common stock at $88 per share and some Apple $AAPL common stock at $108 per share here right now.
And here’s a few more Q&A for you.
Q. Do you think we will see a rate hike in september? And what will it do to the market If it happens?
A. Do you know anybody who’s going to sell their stocks when interest rates go from 0% to 0.25% or even 1%? Is there a huge pent-up demand for CDs or Treasuries that yield 1% more than the almost nothing that they yield right now? I think history tells us that 0% interest rates are going to create huge asset bubbles and that 1% interest also force people into risky assets creating huge asset bubbles. Rates will eventually climb and probably go higher than anybody currently thinks possible — say 10% interest bearing CD accounts in the year 2030 or so. But for the foreseeable future, the Bubble Blowing Bull Market appears to be headed higher until rates go higher naturally and the Fed eventually chases them upward, not the other way around.
Q. I am interested in your thoughts on Twitter. I read your posts over the last few weeks regarding your interest in buying small tranches as you anticipate Twitter to be a longstanding viable / profitable player. However, with FB building comparable products and having a much larger R & D and overall user engagement, do you not see the potential for Twitter to become somewhat obsolete. My concern is that Twitter has been too far behind the game and has little choice but to try to emulate FB products / strategy.
A. $TWTR‘s got to find a brilliant CEO to help take them to the next level and turn the tide there, or they are probably in big trouble. I do believe that the Twitter platform is worth tens of billions of dollars in the right hands. Periscope will probably be worth $10 billion or more too. But the longer the Twitter bus moves without a driver, the more at risk the company becomes. Twitter is not “cheap” despite being down and near 52-week lows. On the other hand, Twitter’s growing its topline 60% this year and should do 40-50% topline growth next year. Next year’s earnings could range anywhere from 60 cents per share up to a $1 per share. But let’s look out over the next couple years and know that if Twitter can generate $3 per user per month, or just 10 cents per user per day, that’d put them on a billion dollar per month revenue run rate — say $12 billion per year in sales, up from $2 billion per year this year and up from $3 billion per year this year. If this company can figure out how to grow their user base on top of that too, we’re off to the races. I could see $TWTR at $100 per share in three years. Now all that said, until they get a new CEO who knows what they’re doing, the stock has been and probably will remain “dead money.”
Q. Hi Cody, we have mentioned the “race to the bottom” theme in some recent conversations. While this is most obvious in certain tech sectors it now seems to start spilling over into other parts of the economy. Even in the mining and farming sectors technology is already playing an increasing role, lowering costs and eventually also prices (aka “good deflation”). Which sectors or stocks would you consider most immune to this race to the bottom effect ? Do you consider to go overweight in stocks of companies that are least likely to be hit by “creative destruction” in the near to medium future? Or is that a worry for tomorrow?
A. Companies like Facebook, Google and Apple that have proprietary platforms that have billions of users on them far surpassing “Critical Mass” and which nobody else can emulate are probably the most immune to technologically-driven price declines. I don’t consider falling prices to be “deflationary” as I consider deflation and inflation to be driven by monetary policies. Prices for EVERYTHING in the economy could and should drop to make all of us feel and be richer, but the Federal Reserve and the Republican Democrat Regime borrow and/or print excess dollars that prevent the average Joe from benefitting from a lower cost of everything. There’s always a fine line between worrying about long-term technological disruptions/revolutions and balancing real-life near-term. No easy answer on how to navigate these trends, but I do spend a whole lot of time doing so to try to gain my edge in the markets.
Q. What advice, if any, would you give to a college student that wanted to one day work in investment management?
A. If you didn’t go to Harvard or work at Goldman, you’re going to have to blaze your own pathway to money management. I spent years building up my own “Brand” to help me get to a point where I could raise funds to manage and there are plenty of pathways to doing so and no “proper” way. Start on a foundation of hard work, smarts, discipline and ethics and then keep your eye open for opportunity and be willing to take risks with your career and job choices. We live in a social world and you personally have done a great job of starting to build your brand and your credibility by posting your ideas, commentary and analysis here in public for the Scutify community.
Q. What’s your advice for younger people around age 20 that want to start investing in stocks?
A. My advice to anybody who wants to start investing in stocks is to start slowly and don’t be greedy. Read everything about investing that you can get your hands on and avoid penny stocks and micro cap stocks. Don’t try to double your money or expect that you’re going to be smarter than anybody else who might be on the other side of your buying and selling. Ask questions from professionals who aren’t trying to pump and dump or get your money into their own hands. It’s not easy. The stock market is rife with conflict of interests, scammers and pitfalls and don’t ever think it’s going to be “different this time” even thought every time, every day, every age is DIFFERENT.
Anyway, as I finish up this post, the DJIA is down 300 points for the second day in a row, and I’m starting to nibble on some stocks again. I don’t think this Bubble Blowing Bull Market is quite over yet and I expect we’ll look back this time next year and see higher prices than today’s quotes. And be sure to download the TradingWithCody apps for iPhone and for Android or reach out to me on Scutify.