Here is the transcript to this week’s Live Q&A Chat. Visit the Trading With Cody Chat room on the Trading With Cody iPhone App, the Trading With Cody Android App or at https://twc.scutify.com/members/. If you have any questions about our service, just email us at firstname.lastname@example.org.
Q. Are we heading into a bear market?
A. Man, the fact that I keep getting asked (and sometimes exasperatedly so) about whether we are going into a bear market is one indicator that we’re not. 🙂 Seriously though, I continue to think that we’ll have some macro economic and global economic weakness and that the currency wars will come into more focus and the central banks around the world will eventually create yet more easy money to enable yet more financial engineering by giant global corporations (and force savers into stocks/risky assets) and that tax policies from the developed world’s governments will be to maximize corporate profits and so on will eventually drive yet another leg higher in the Bubble-Blowing Bull Market. But first, I think we could see a 5-15% pullback in the markets at least once or twice. You can see why I’m not nearly as aggressive on the long or short side as I have been in years past. This is one of those times when it’s clear that trying to game the collective action of thousands of stocks (the stock market) as a way of trading your hard-earned money is not the best of ideas.
Subscriber Follow-up: The Nasdaq corrected 10% already and another 10% is a bear market.
I’m thinking of a “real” bear market, something of the order of 2008 or 2001, when you ask me if we’re “heading into a bear market” from these current levels.
Q. Hi Cody. Most soldiers are praying that Hillary doesn’t win the election as most believe that she’s as corrupt as they come and, like the President, truly doesn’t care about their well-being. I know of too many that have returned from Iraq and Afghanistan and are living on the streets and yet, any illegal alien can get free everything. The soldiers don’t want anything given to them as that’s not their nature, but they see a Hillary presidency as an utter disaster for our servicemen and women and basically a continuation of the sentiment that emanates from the current administration. Needless to say, the soldiers want Trump as he’s the only one that they feel will try to change the system to allow the soldiers an honest hand-up (i.e. jobs, jobs, jobs)…Believing that this great country will not choose to elect Hillary, what advice can you provide to the soldiers that don’t have much to invest but want to partake in the stock market on at least a small scale. The hope is that Trump will win and if so, will that favor any particular sectors that small-scale investors (like most military personnel are this day and age) can place a small amount of money in that may have a better chance at growth? Thank you for your reply (sorry for the long message).
A. First of all, thank you for serving. I’m honored to provide complimentary Trading With Cody subscriptions to any active service member.
Let me start my answer to your question about investing into the next president’s term(s) by stating outright that I will never vote for a Republican or a Democrat in any national election. If Hilary is corrupt for taking money from so-called “businessmen” like Donald Trump, what does that make the so-called “businessmen” who give her money? Likewise, we know that Trump has used bankruptcies, bond offerings, restructurings, and endless lobbying/payment/zoning/real-estate dealings, as well as all kinds of other shenanigans (including getting taxpayers and poor people to pay tens of thousands of dollars each in “tuition” at Trump’s old Get-Rich-Quick-in Real Estate “University”….and I’m somehow supposed to believe this guy is a populist or a capitalist?
As for how either will impact the market, the broader market will probably do better in the first few months after the election if Hilary wins, though health care would likely be hit. Which is ironic because hers and Obama’s health care system and laws are written by the giant health care lobbyists to maximize how much corporate profits the system can squeeze out of itself (which means that you’d probably have a great trade in buying the health care stocks when they’ve been crushed). The market might actually be a bit scared about Trump’s rhetoric about immigration, trade agreements, and other random quotes. In the end, no matter which candidate wins, I expect we’ll see very tax-friendly laws and subsidies for the same giant corporations and banks that currently benefit so much from tax-friendly laws and subsidies. Both will essentially be pro-corporate/big-money/monied-interests/socialized-losses/privatized-profits/profiteering/etc.
The small towns of this country, the small businesses, the poor, the middle class consumer — will all continue to see their economic and political power fade under either Hillary or Trump. The rich, the corporate, the global, the government — will all continue to see their economic and political power grow under either Hillary or Trump…We can change the system, but it will take time and won’t be as easy as pulling on a lever that says “R” or “D” on it. We can do it by starting a real write-in campaign protest vote with a view to getting a write-in candidate into the White House in the next ten or twenty years. You can actually make your vote count by writing in someone not on any ballot (P.S. here’s my own personal Facebook page for my candidacy for President of the United States as a write-in: https://www.facebook.com/group…).
KLTX’s Answer: I can not speak for Cody, but if I was in your situation, and wanted to invest some hard earned money that I didn’t need to have access to for a year or two (this is an important point)…I would look through Cody’s top picks and invest in the companies that you use every day, and that you like the service/products they provide. I would also follow Cody’s playbook for investing in tranches…for example, buying a 1/5 position in the names that you like. If you have enough dough, you can invest in all the names…but if not…Then maybe pick a couple and put your toe in the water with 1/5 type positions. Cheers!
Cody’s Answer: KLTX has this right too, by the way. There are no easy answers for trying to trade small money into big over a two or three year time period. “I can not speak for Cody, but if I was in your situation, and wanted to invest some hard earned money that I didn’t need to have access to for a year or two (this is an important point)…I would look through Cody’s top picks and invest in the companies that you use every day, and that you like the service/products they provide. I would also follow Cody’s playbook for investing in tranches…for example, buying a 1/5 position in the names that you like. If you have enough dough, you can invest in all the names…but if not…Then maybe pick a couple and put your toe in the water with 1/5 type positions. Cheers!”
Q. Curious what you make of all the ho-ha around hedge fund performance and fees?
A. Great hedge fund managers are probably worth every penny of their fees and most any of their investors would say that. As for the general industry, nah.
Q. Hi Cody, You posted yesterday: “… the path of least resistance for gold for the next few months and next few years…is higher.” You have also posted that you thought the miners could not be profitable without gold over $1,300/oz. Gold is now just under that price. What do you think about the gold miner ETFs here?
A. I’m concerned that EVERY miner stock I check has billions of dollars of debt and needs gold to stay here or go higher to pay it off. I’d rather own gold coins than gold miners.
Subscriber Follow-up: If as you posted “… the path of least resistance for gold for the next few months and next few years…is higher,” doesn’t that mean that the price of gold is going to stay higher, at least for a while?
It means I THINK the price of gold is going to stay higher, at least for a while. But if gold drops to $1100 again, my gold coins will be down 12% from their current levels and the gold miner stocks would likely be down 50-80% from current levels, and some would be wiped out.
Q. $AVID – I bought a small position yesterday. Stock had good earnings and I think (have not researched in depth) that it is working through chasm of moving from box software to SAAS. Also it has embraced the “consumer” play with Adobe Premiere Pro integration to go with its own “Professional” software which is the industry standard for studios. Also, from a technical view, there are some large buying spikes and little selling. Given the amount of money being invested in generating video content and their position, it seems interesting and with little downside risk – do you have an opinion? P.S. It is based in USA.
A. I didn’t know small cap $AVID before your question, but whoa — the stock is trading at 5.5x this year’s earnings and 4.5x next year’s earnings estimates. Let’s dig in further. $AVID has little to no revenue growth on about $525MM per year, $95MM in debt vs $17MM in cash, and a $250MM market cap. Those metrics tell me that there’s probably some sort of other off-balance sheet kind of investment/obligations there. I don’t like the balance sheet, especially when I just found this “Avid Technology board hikes stock buyback plan by $100 mln“on top of another $100MM they’d just spent (wasted) on a stock buy back from as far back as 2008(!) and that alone would keep me out of the stock. That means $AVID was buying back their stock ten years ago when it was trading in the $30s and $20s vs today’s quote of $6 per share and now they have little financial flexibility. Not the stock for me, but good luck either way!
Q. What do you think about $NVDA‘s earnings tomorrow? Do you intend to add some more?
A. It’s possible that expectations (read: hype) around $NVDA‘s ability to benefit over the last 90 days from its position as a leader in Virtual Reality are too high. I’ve got a small position that I’m not rushing to build up and I might end up regretting that if it pops after its earnings report, but the risk/reward of rushing into more vs being in a mode of patience on that stock seems to favor just being patient for now.
A. I think over the next two years that $HUBS is in trouble. Near-term, it could go to $50 or even $60. I might have to cover it and take the loss if it got up into the high $50s. I don’t think it will be taken out but that’s always a possibility too.
Q. What are your thoughts on $DIS here? Thanks.
A. $DIS got so many moving pieces. I owned the stock 10 years ago at $20 and used to tout it on TV and my writings all the time, but I’m not so enthralled with Disney in 2016 at $100.
Q. What are your views regarding $TSLA? Now that the euphoria from the new bookings is behind us, would you consider this a short candidate/buying puts? Thanks.
A. Yes, I think $TSLA is a long-term short, but I don’t know about the timing just now. That stock trades on a hype both directions and is a battlefield.
Q. Good afternoon, Cody. I am holding $ICON position with about 50% loss at the moment. Should I continue to hold or take a loss considering that I have couple years time horizon? Thank you!
A. I’m afraid all I can tell you is that I sold my $ICON for a loss after the accounting scandal hit and I wouldn’t buy it back personally these days because of that accounting scandal.
Q. $AMZN doesn’t know it’s supposed to sell off today. My goodness.
A. $AMZN, simply amazing rally strength and simply getting to an amazing valuation level too. Gulp.
Subscriber Follow-up: Does $AMZN “gulp” mean you’re close to shedding another 10% of what you have
A. Nah, not gonna trim more $AMZN for now. Maybe closer to $750 if it gets there.
Ok, I’m gonna go check on my 10-month old Amaris (https://www.facebook.com/AmarisWillard/) and I’m gonna get some lunch. Peace, love and happiness folks. Thanks for being a part of the Trading With Cody community.
Subscriber Follow-up: Thanks regarding $AMZN. That Amaris is such a sweetie. Love the Minion glasses!