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
Q. Hi Cody, what is your outlook for the market the next few years due to a new president and a very long bull market so far?
A. Well, let’s just step back and catch our breath a little bit and talk about what the biggest dynamics and drivers of the economy and stock market are. We are going on year eight of the Federal Reserve being at 0% interest rates–and dozens of other highly bubble-inflating emergency measures. Remember long ago, when I would talk about how QE 1- whatever wasn’t nearly as important as 0-1% interest rates anyway. And guess what? Just as I predicted we are still at basically 0% interest rates from the Fed. That means giant corporations and global banks have access to trillions of dollars of tax payer supported or outright backed dollars with which they can play all of these financial engineering games. That is, expect lots more buybacks and whatnot. Trump and his Republican-dominated Senate and Congress are talking about cutting interest rates for giant corporations and global banks from the high single digits, which is their current real income tax rate (you can forget about most corporations ever paying 20 or 30% as is often quoted in the media as the corporate tax rate in this country). Not to mention allowing these giant global corporations to bring back trillions of dollars of offshore cash at zero to some marginal tax rate. Remember that any small business paying 30-50% income tax rates and trying to fund their business on their credit cards or small business loans are at huge and ever bigger disadvantage because of these giant corporate-friendly tax policies. What is the upside of all of this? Asset bubble-inflating, higher post-tax corporate profits and profit margins, and a general profiteering frenzy as has been the case for my lifetime. I certainly expect several 10-20% crashes/pullbacks in the stock market over the next say, two to three years, but I think the path of least resistance is more Bubble-Blowing Bull Markets. I am more of a seller than a buyer at this current moment because of the pitches that we see at the current time, but I remain generally long lots of Revolution Investing stocks with a select handful of shorts.
Subscriber follow-up: Thanks Cody for the detailed reply, just amazing how long this bull market has been!!
Q. Cody, how do you think the large tech stocks will perform under the Trump administration? I read some feel large tech only pays about 20% tax rate now so the Trump reducing corporate taxes is not a big deal for big tech. Your thoughts? Thanks.
A. I doubt any big tech company pays anywhere close to 20% right now when you consider all of its revenues and earnings and taxes. That said, even if there is another 5 or 10% of tax rate savings that giant tech and other giant corporations can squeeze out (again, unfairly to small businesses) it’s worth billions of post-tax corporate profits. I don’t think we can try to gain the nuances of the next four years worth of tax policies in regards to tech and/or any other sector. Like with the prior discussion about what matters most–it’s the giant corporations and global banks who are set to benefit in ways that matter, not the nuances between disparate sectors.
Q. Do you have any interest in $FIT here? I am seeing a lot of people with new Fitbit products of late.
A. What’s Fitbit? Seriously, though, I have removed $FIT from my trading screens and have lost all faith in management there and will probably never trade that stock again.
Q. Cody, I wanted to ask you about $TST. I read it was possible to be de-listed. Does this change your stance on it in any way ?
A. Remember that from the beginning, I have said that we should consider our investment in $TST to be a late stage venture-capital-like investment. That is, we are investing in it because we think it can kick off quite a bit of cash flow in the next couple three years. The company has nearly $30 million in net cash and is valued at slightly more than $30 million bucks. The company will do $60 million dollars or more in revenue next year. I am betting that the company can grow enough and be profitable enough that it will kick off several million dollars a year in 2-3 years. If that happens, the stock will be up quite a bit from its current levels. If they fail and have to burn a lot more cash in the next 2-3 years, the stock will be lower. It is a small risk that it gets de-listed from the NASDAQ but the valuations would still reflect the cash flow in 2-3 years, whever the stock is traded.
Subscriber follow-up: If $TST is delisted does it then trade on the pink sheets? Tradable it is, then, right ?
A. Probably is the answer. We won’t know until it all plays out how it will play out or where $TST will trade.
Q. Is the China tech company, Tencent, a decent investment? Seems like they are in a good position right now. Or are Apple and Google much better investments?
A. I generally avoid investing in Chinese-based companies, but I have long considered Tencent and $BIDU to be the best if you are going to invest in Chinese tech companies. Vis a vis $AAPL and $GOOGL, Tencent probably has more volatility risk not to mention the aforementioned Chinese risk. Let me put it this way, I own $AAPL and $GOOGL and I don’t own Tencent.
Q. Do you feel that $FB will (does) try and tilt the news much like the standard news outlets. It did seem odd to me that they would undertake to “fact check” the news.
A. No, I think it is a silly discussion that t.v. talking heads and the Republican-Democrat regime that it supports use to distract us from real issues. Certainly, I and everyone else has seen an increase of fake news, but I see it in my email just as often as I see it on $FB. Is Google supposed to start filtering news in my Gmail too? Not gonna happen period.
Q. I have not bought $PI yet. Is it too late now? Should I wait for a decline?
A. Well, $PI is certainly having a decline today as it is down 9% as I type. This is another one that will either be a huge winner if they succeed in becoming the defacto standard platform for RFID chips. If it turns out that the company is the actual supplier for $AMZN and its new grocery store and/or if it is the primary supplier for some other huge existing grocery store chain that now decides to move into RFID checkout, the stock could go up a lot from here because there is a lot of growth. This one will be very volatile as we have already seen and there are no guarantees ever anyway–I should repeat that I do consider this a high risk-high potential reward long term investment.
That’s a wrap for 2016! Wishing everyone a Happy New Year and a prosperous, healthy and happy 2017.