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 WithCody Android a
Question from Cody: $DJIA near 20K, charts straight up. Who’s more scared right now, the bulls or the bears? See poll on Cody’s Twitter
Q. How’s the family? Amaris doing well?
A. Thanks for asking. Let me tell you how well Amaris is doing. I bet she’s gained at least a pound since we got her home from Thanksgiving week in the hospital. And that kid’s latest outright miracle is that she’s started spending most of her day OFF the oxygen/humidity mask and simply wears a small “nose” on the end of her trach. I spent last night with her and she slept like a baby and/or played peekaboo and/or kicked and giggled with me til 4am when I went to get a couple hours of sleep. Lyncoln is talking up a storm, playing a lot of Hide-and-seek, is an iPad/iPhone savant and is one of the easiest nearly-3 year-olds you’ve ever been around. Wife is good, beautiful, working hard and a bit tired. Pets are all good, but a bit lonely.
Q. Is this rally justifiable? Majorly overheated short term? Do you think we have room to run?
A. There’s still a lot of longs “waiting for better entry points” and a lot of shorts fighting for life, but still alive. I tend to think the path of least resistance for the stock market for the next few weeks is probably mostly sideways. The bulls are still buying/leveraging up/getting longer and the shorts are still out there too…so maybe the market will just punish both of them and swing back and forth up 2-3% then down 3-4% then up 1% then completely flat for a week then down 3% then up 2% and so on. Rangebound between the low 19000s and the mid 20,000s for the next few weeks? That’s my best guess.
Q. Cody, now that we’ll have an Energy Secretary who has said he wants to eliminate the department (when he remembers which one it is and can get to work) or at a minimum, I suppose, will attempt to cut back on its authority, do you see any impact/lessening of fed support of solar/fracking/etc. as opposed to fossil fuels?
A. Oh my gosh, no! Exactly the opposite. The nominated Energy Secretary, Rick Perry, along with the nominated Secretary of State, the actual CEO of the largest government-supported/subsidized/protected energy company in the US (ExxonMobil), means the amount of government support/subsidies/protection for the giant energy companies will be greater than ever.
Subscriber follow-up: On my question re: energy, i think you mis-read my query. We’re in total agreement. Dinosaurs (or what they’ve left behind) rule!
Q. Do the recent oil production cut deals change your outlook on oil/energy at all? It seems very apparent US drillers/frackers are quickly ramping up production. Also, hard for me to grasp why many countries would agree to cut production when others (i.e. U.S.) will likely ramp up production…and the cycle goes on.
A. My out look for energy remains: ” Energy Short-term – The big story in energy isn’t OPEC or fracking — it’s debt. There is at least a couple trillion dollars that US-based energy companies carry on their balance sheets. There’s another couple trillion dollars in soveriegn debt from countries including Russia, Venezuela and other members. Most of those US-based energy companies need $40 or higher oil prices or they will end up defaulting on their debt payments, going bankrupt and reorganizing their financials. The problem is that there is still so much capacity from fracking and new technology wells, that can quickly be brought back on line, that every time oil does bounce well above $40 a barrel, all these heavily-indebted, very scared companies will turn that capacity back on and supply will then rise and oil prices will likely head back down into the $30s. Over the next two to three years, we’ll hopefully see dozens or scores or even hundreds of energy companies go bankrupt, dozens of formerly large cap stocks like FCX, CHK, BTU will all end up bankrupt, allowing the companies to write down all that debt they won’t ever be able to pay back and the new shareholders, employees and executives can then prosper. That’s actually the best case scenario. The worst case scenario for energy near-term would be if energy prices were to spike strongly again, and oil were to spend the next year above $50 a barrel, and all these zombie energy companies with too much debt will think they’ve got an indefinite reprieve. The energy sector needs to recapitalize (or get bailed out like the Republican Democrat Regime did the banks back in 2008 — more on that in a minute). Energy Long-term – The fact is that if you look back at the historical cycles in energy, they can take 10-15 years or even longer to play out. As Jim Rogers used to explain to me on my old TV show, energy and commodity cycles typically last 17-20 years. We’re in year two or maybe three of the energy and commodity downturn and people think it might already be over? I strongly doubt it. Don’t forget that solar and some other renewables are going to become an ever bigger part of our energy systems and they will keep downward pressure on energy prices for decades to come too.” From March 22 earlier this year, but still pretty much the underpinning of my energy analysis.
Q. Wondering your projection for big banks from here? They are up big since the election. Do you think the upside in big banks continues? Any thoughts of shorting this sector?
A. I’d be leery about shorting the banks when it appears they will be running the government monetary and fiscal policies more than ever before as Trump puts in even more banksters into power than past Republican Democrat Regime leaders.
Q. Do you give validity to the theory that there is some time of “waiting til January to sell” because cap gains tax will be lowered?
A. I’ve heard the “waiting til January to sell” one too many times on SiriusXM CNBC/Fox Business/Bloomberg while driving to think it’s anything more than a talking point.
Q. Does $PI have any decent competitors? Is$28 or so a decent entry point?
A. Yes, there are competing RFID platforms to $PI, but none that have the traction that $PI does, in my opinion.
Q. Where’s a good entry point for $PI?
A. If you don’t own any, I’d suggest looking at adding 1/3 of a full position now and then being patient and maybe adding 1/5 in a week or so and then so on.
Q. $GIMO has gone down 20% since we last talked about it. Any closer to adding it?
A. With $GIMO‘s forward P/E is just below 30 now and with its recurring revenue model and 20-30% projected topline growth and high margins, I’m warming quite up to the name.
Q. I know recently you wanted to stay away from $AMD because of debt and probably because of huge run up. Could they be a nice, risk/reward longer term investment? I think there is plenty of room for them to play along with $NVDA and $INTC.
A. Mea culpa on my bearishness on $AMD but I do think the stock is way overvalued here and discounting future revenue streams in Revolutionary Industries like VR/Self-driving vehicles/AI etc that people assume it will catch traction in because of its seeming similarity to $NVDA which is already catching traction in those Revolutionary Industries. In fact, I think shorting $AMD above $10 a share vs holding my huge gains in my long-term $NVDA long might be a good “paired trade” idea.
Q. I’ve read about $AAPL going to OLED screens in the iPhone 8. Is $COHR a beneficiery?
A. Will look at $COHR and its relationship with $AAPL, but I’m leery about chasing smartphone supply chain stocks at this point in the cycle.
