Here’s part 1 of 2 of the transcript from this week’s Live Q&A Chat.
Welcome to another edition of Cody Underground also known as Trading With Cody Live Q&A Chat. Go to tradingwithcody.com to sign up to see all of my trade alerts anytime I buy or sell stock and occasionally an option and to see all of my positions. And I’ll tell you what, we’ve had a heck of a year so far.
So far, just in this earnings season, we have had 94% of our longs posted in line with beats. Eighty-two percent beat on the revenue. One hundred percent of our shorts missed their revenue estimates. And, just this season, we’re up 13% on our longs and our shorts a following 17% percent on average just in the earnings season. We’ve had some great stock picks over the years, Apple in 2003 at a buck, Google the day it became public, and more recently Facebook at twenty or so, and AxoGen at four. Where is it now today? At about twenty-seven.
Knock on wood, you know? We’ve had a great run and I expect it to continue. No promises, no guarantees; it’s hard work. I never rest on my laurels, I’ll tell you that much.
Let’s talk markets. And you can’t talk about the market these days without talking politics too. The biggest news right now around the markets at least when you watch and listen to the pundits is that Republican senate/congress tax bill that Trump has spearheaded. Stepping back, the fact is this is more continuation than I have seen in my lifetime forever, whether it’s Republicans or Democrats, whether it’s Obamacare or this Trump/Republican tax bill, whether it’s the bailouts under Bush and then continued much bigger bailouts under Obama for the giant banks — the general thrust of our government is to protect and enrich giant corporations. The giant corporations fund the campaigns of Republicans and Democrats and you can’t change human nature. And so, as long as giant corporations are funding Republicans and Democrats that will be the trend. How would this change?
Anyway, the point is that Trump Republican Democrat Regime Tax Bill, the latest one, is just further continuation of exactly that policy, that concept, that trend. And, it’s going to be good for corporations. It’s going to be good for the stock market. It has been good for the stock market.
Lower taxes can propel higher valuations. Taxes are already lower for giant corporations than Giant corporations that don’t pay 35% in tax-don’t kid yourself, it’s probably closer to 10% or 15% right now that the effective tax rate of corporations are, and that will be even lower. They’ll bring many more trillions of dollars of money that the multi-nationals have stashed overseas back and that money will be brought back mostly tax free. The loopholes that they have written on the side of this incredibly loophole ridden tax bill will be a windfall for some corporations. For someone to say that this is somehow simplifying the tax code — drives me crazy. This bill does not simplify anything. It’s got crap written on the side on the margins in handwriting. It’s got pages upon thousands of pages that refer to bills from sixty-seventy years ago that changes one word in that bill in one paragraph of that bill. That is by no means a simplification.
So, what should we expect the results of this bill will be? You’ll see a continuing and hollowing out of rural and middle class and inner city economies, and you will see a further increasing of the wealth gap. The middle class and poorer people will have not just less benefits, but less take home.
Look, you got to own stocks. That’s one of the reasons I’m so bullish on the stock market and I think that we are living in a bubble-blowing bull market because of these concepts. Politically, I fight them. Financially, I ride them.
Apple’s tax rate will go lower. They’ll be able to bring in $150 billion or $200 billion or whatever that number is that they have stashed overseas and meanwhile they are going to use our court systems, our roads, our police and armies, etc. The stock market will benefit from this cut in part because everybody will say, “Hey, the economy is doing great.”
Frankly, the economy is doing great. I mean, relatively speaking. Tt’s a boom time as I’ve been saying for the last seven or eight years. That’s a reality too and we can’t deny that. That’s one of the things that you’d see so many hedge fund managers do over the last five or ten years is deny the reality of the strong economy. Right now it is a strong cycle and there’s nothing disrupting that cycle.
Let’s talk near-term stock market stuff. I think we’re having a sell-the-news kind of reaction to that passing of the tax bill. The markets have priced in that tax bill for months. Everyday you listen to the pundits on CNBC, or FOX Business, or you read it on market watch-how the market is anticipating that there’s going to be lower taxes and that’s been going on for months and that becomes reality and it does price that in.
So I think we are having a little bit of a sell the news reaction. Will it be a crash? Probably not. Maybe a five or ten percent pull back, which probably should be healthy. Boy, it would be great to hear some people freaking out about the stock market for once, wouldn’t it? Besides the ever perma-bearish hedge fund guys who’ve been bearish for the last seven years. I guess that’s that.
What else did I say I was going to mention today? Bitcoin! One of my partners Ross Mark, who produced The Tonight Show for twenty years and he keeps telling me he is sick of hearing about Bitcoin. Just about as sick of it as I have been for the last three months since I get a lot of questions about Bitcoin. It is what it is. I talk about bitcoin because everybody’s talking about it and we should address it.
So, here’s the story. At least let me give you a little bit of background — Trading With Cody subscribers know this. I accepted a Bitcoin payments on tradingwithcody.com and I invested in some of it back when it was around $100. At maybe $200, I started buying more.
I took payments; one Bitcoin for one month of Trading With Cody. I charge $99 a month. Now those Bitcoins that I received, unfortunately I sold some of them at $2800, but I still own a couple of Bitcoins. It’s not a very big position for me, but I’m probably gonna sell almost all of them at $17,000. Here looking at it today it’s at $17,000 a Bitcoin.
I heard Alan Greenspan on CNBC this morning when I was driving into work, and he was talking about Bitcoin, and it sounded to me like he had it confused with a fiat currency. He thinks it’s a fiat currency. He doesn’t understand how the supply of Bitcoin has been limited based on mining and ever-more complicated mathematical equations that must be solved and other blockchain phenomena. It is not a fiat currency, man!
Alan Greenspan, Dr. Greenspan. The guy does not understand what a Bitcoin is apparently. He doesn’t understand the whole concept that it is a countermeasure to a fiat currency; like the U.S. dollar-that is government controlled; that can be printed more of- endlessly. He talked about it for five or ten minutes and it didn’t make any sense and I didn’t understand anything he was saying.
By the way, he said Bitcoin was worthless. He said it has to have a value of plus or zero; it can’t have a negative value. “You can’t create value in a currency exchange out of nothing,” he droned on. And again, he doesn’t even understand that the guy who created this thing (a hard to pronounce name) is probably a conglomeration of four or five different Japanese company names, like Toyota and Kawasaki and whatever, you get it. Google it, you’ll see it.
There’s no central control over blockchain and Bitcoin and that’s the whole point, Alan Greenspan. I’m gonna have to find an article that I wrote several years ago where I took every quote that Alan Greenspan said that was incredibly wrong in historical context when you look back. And even just the euphoria thing of 1996 right before the bubble that he created with 1% rates back in ninety-eight and ninety-nine, and the dotcom bubble that he helped create and fuel.
Let’s bring this all back around. Going back to the Trump tax policies and even the Greenspan and Central Bank policies of my lifetime, I’ve seen them go from fifteen percent (Central Bank rates) down to zero and we’re still there, and that benefits giant corporations and banks, and the people will say that higher rates will benefit the banks. Hey man, bank earnings are at all-time highs right now with rates at zero and bank rate earnings have been going up the entire cycle that rates have been going down from 15% to zero.
The fact that we can borrow trillions of dollars at 0% enables the Republican Democrat Regime to continually grow the debt of this country that you, your children and your grandchildren will someday either have to default on, capitalize, or payback, or continue to float. It’s great when the government and people can borrow money at almost 0%, for now. If a bank would loan you a trillion dollars right now you could go and spend it — wouldn’t the be awesome? That’s what the government does. And you can just keep on borrowing more money as long as it’s near 0% interest rates. Government-controlled artificially low interest rates enable this cycle even further. These things get to be vicious feeding upon themselves or virtuous feeding upon themselves depending on your perspective.
So, am I a Libertarian or am I a liberal? I don’t know. Some of my friends think that I’m Libertarian, some think I’m liberal, and I’m a little bit of both. I’m free thinking, I hope you are too.
Q. Do you think there’s a future in more of these coins popping up all over and taking the lead with what Bitcoin did or do you think it’s just like, I know there’s Litecoin and other coins out there, but do you think other people are going to sell this trend? I mean, should we have currency for different things around the world comparing with Bitcoin? Is it a safe bet or not? What’s your thoughts?
A. Hey Look, I will say as far as should goes I’m much more Libertarian than anything else when it comes to currencies, and so I believe in freedom. I’ve talked about alternative currencies for ten years. Back on my show I used to talk about how maybe we should have a Warren Buffet -backed currency and a Cody Willard-backed currency and a GE-backed currency. Then someone came up with this rich more revolutionary concept of cryptocurrency and it’s great. I think there is a place for cryptocurrency. I believe it is real, but I believe it is in a bubble right now. I believe it will probably be below $5,000 at some point in the next few months and maybe below a thousand when all of this stuff gets wiped out, which leads me to the next part of your question.
I think Ripple, Litecoin, Ethereum and Bitcoin are the four that are most likely to succeed — most likely to be an Amazon while most of the other coins are pets.com. In other words, most cryptocurrencies will eventually go to zero. I think most cryptocurrencies are a scam and a fraud. You shouldn’t touch them. And frankly, I don’t think you should buy Bitcoins right now either; nor should you ever really invest in them. But in five to ten years I do believe we will be using cryptocurrencies of some sort. Probably Bitcoin, and maybe one or two others. A lot of trillions of dollars of transactions and tracking and changes in the economy will happen because of blockchain- the technology underlying Bitcoin.