I had a lot of fun doing this week’s livestream Q&A, as I actually played ping pong while talking about this Ping Pong Stock Market (which is — no shocker — bouncing today after dropping sharply earlier this week). The best part is the beginning when I accidentally knock over the entire box of ping pong balls I was about to use.
You can watch a replay video of the livestream at https://youtu.be/neiG-kE_pV4?t=18s. And below is the transcript.
Cody: Welcome everybody to another episode of Cody Underground as we talk about this ping pong stock market while I actually play ping pong. Wait, oops, I didn’t mean to knock that over. That wasn’t very good. But, hey, that is some good, good comedy there.
Volatility begets more volatility, and often times, can signal a top. Not necessarily THE top, and it doesn’t necessarily mean that the markets are about to crash. But you’ve seen, if you go look at a one or two year chart, on the DOW, or the QQQ’s or the SPY, S&P 500, whatever, you’ll see that there for two years, almost, we barely had any 1% daily moves. For months at a time, markets just steadily climbed. As I called it for years, a steady Betty stock market. But you’ve got a ping pong market now. And it’s not necessarily that the 10 year treasuries, for example, by the way hit 3% yield this week. It’s that the move in Treasuries from the day that Trump was elected to the 3% has been pretty swift and large, and when you have the moves that get volatile like that, it creates other volatility. And what really becomes a concern is, here we and everybody are all talking about how the economy’s fine. The banks are fine. Earnings growth is great, but when you get spikes, and when you get moves in the treasuries, and then the dollar has been out of tear, and you’ve got … When you get moves like this that get sustained, well, there’s probably someone out there is swimming naked, to steal a phrase from Warren Buffet. There will be exposure out there that these banks will have. That will be to the tune of billions of dollars, and then other banks will have exposure to those banks.
You remember, MF Global, Jon Corzine, republican democrat regime-er. Governor of New Jersey, the chairman of Goldman and Sachs, came back and ran MF Global after he lost an election in New Jersey. And ran MF Global and apparently they were making bets on leverage with the depositor’s money that they weren’t supposed to be making, and they thought there’d be a return to the mean. Things would get back to average. Whatever he was betting on, I don’t remember what the details were. Some currency or some derivative or some securitized real estate something. It doesn’t matter. The fact is that when he finally was exposed, there were other banks exposed to that, and you can get these ripple effects.
And that’s what you’ve got to be concerned about, and again, I’m not saying this is the top, go run for the hills. I still own a bunch of stocks that I’ve owned for years. I’ve trimmed them down. I bought some puts back in late January and nibbled a couple more when the market spiked after this-
You know, it’s just something that we should be aware of. So I keep saying that the stock market, and not just the stock market cycle here, but the economic cycle. The bubble, what I’ve called for eight years now, the bubble blowing bull market, is long in the teeth. So that’s the latest story I’ve got about this present day volatility.
Ah, man, the camera isn’t straight now. Piper, can you just tilt it a little? That side, there you go. Now the other way. Your left hand’s gotta go up.
You know I used to have a TV show on Fox. I had like 12 people supporting me just on the cameras and mics. Not to mention producers. I sure didn’t have as much freedom to play ping pong as I’m doing it. You know, I used to actually play basketball. I had a basketball there in the Waldorf Astoria Bull and Bear Bar with all of these antiques and glass and marble and bronze statues and very expensive liquors. It was pretty fun. I’d spin the ball and do tricks while I was talking, doing a bit or something, and my co-anchors, Rebecca and Eric, one day, as I was doing one of my lone bits, I was talking about something, they start throwing the ball back and forth to each other being funny. And it wasn’t really very funny cause I’m actually trying to talk about bailouts or something, and the ball’s going back and forth in the air. That’s why I hadn’t used the ball, and then they missed. And they dropped it, and it clatters behind and breaks all these glasses. I was bummed that my basketball was quickly banned by the producers.
Alright. I’ve got some questions. Let’s get some answers.
Subscriber: Cody, do you see Amazon making 10 times its current earnings from these levels? And when would they get there? What would it take? Thank you.
Cody: Yes, I do see Amazon earnings going up tenfold from here, but that doesn’t mean I see the stock going up tenfold from here. I think the stock still is upside. I own it. It’s one of my largest positions. I’ve owned it for a long time, and I continue to hold it. Earnings have been long suppressed at Amazon in a search, in a reach for market share. For dominance. And so Amazon Web Services is a hugely profitable segment of their business. Good revenue growth too. Huge revenue growth, but most all segments of Amazon’s businesses, Rothschild’s, most all of Amazon’s businesses show strong growth. 40, 50, 100% growth, and the difference is that Amazon Web Services is incredibly high margin. So instead of, in their retail business running single digit, or even less than one percent operating margins some quarters, or even negatives I suppose in years past, you’ve got earnings juice in these other businesses. Amazon Web Services, for example, is now a multi-billion dollar business itself. So is that part of its business grows, earnings can certainly expand quickly relative to where they’ve been as the retail side of the business has really been the most, the biggest part of the company, as far as revenue goes. And again retail sales, obviously, a low barge in business.
Not only that, you get growth and eventually, Bezos can expand some of those retail margins. He’s putting everyone in the world out of business, at least everyone in the United States in the retail world. Well maybe not everybody not entirely out of business. But remember to shop local. “Support your local business,” as I used to finish every show I ever did on Fox Business.
So anyway, Amazon’s got a lot of growth, and they can certainly expand margins and thereby grow to expand earnings. And the earnings could go up tenfold from where they are now. Time frame, five years would be best case. Nah, I’d say five years. Three years would be best case. Five years, probably seven. Possibly if they’re still expanding and investing and trying to grow their market share globally, instead of just in the United States or something.
I went to buy some shoes online the other day, and Amazon had these hybrid golf shoes on sale. Or I just googled golf shoes on Amazon, and they had these hybrids. And I go, oh those look sort of cool, and they were on sale too. So I bought them, and then I wanted a different color, or maybe a different style or something. So then I was like hey, I should look at another online retailer. So I googled shoe sales or something like that, and Zappos.com came up. Do you know who owns Zappos?
Amazon. Zappos did have a different selection. The shoes there were a little more expensive. I might go back there and buy them anyway, but I had an option of using my Amazon login. And hopefully I’m, hopefully I can actually use my Amazon credit card stuff so I don’t even have to fill it in cause that’s why I don’t go anywhere else. I’m not gonna type in my credit card every time I go somewhere. That’s such a pain. Thank you, Trading With Cody subscribers, for typing in your credit card information if you don’t have a PayPal account. If you have a PayPal account, it’s one click, but if you go to tradingwithcody.com, you can’t simply pay with your Amazon credentials.
Suppose I should do in app purchases, and people could … but then I have to share 30% with Apple. And my own margins go down from basically 99% because there’s very little reproduction cost at additional sales, additional subscribers coming on, maybe 95% I don’t know, but if I’m sharing 30% of that with Apple and/or Android and Google, that’d be a big chunk of my income. No thanks Apple. I already pay taxes (unlike Google and Apple.)
Subscriber: Did you see trading in Amazon and Google and three other stocks suspended due to a price scale code? What’s up?
Cody: No, didn’t see it, and who cares. You know? We’re not trading these stocks so it’s irrelevant to me as an investor in the companies. I don’t know. I missed it. I’ve been getting ready, prepping myself clearly, for today’s Cody Underground episode on YouTube.
Subscriber: Cody, How does this work when stocks get frozen? Is there ever trading?
Cody: Guys, honestly, just don’t worry about it. Who cares if they’re suspended from trading for a minute? Not like that’s gonna affect the valuation or something.
Subscriber: Cody, one more time. That is now an all day suspension of Amazon and Google and bookings on the New York Stock Exchange. It’s still trading on the Nasdaq though. I’m curious. Do they trade on the New York Stock Exchange as well?
Cody: Does it matter? It does not matter. Are you buying Google today? You probably still can’t. I guess, yeah, go back over to the Nasdaq, and it will be okay. It’s funny how, especially if you’re watching, maybe this is on the all the financial news networks, maybe Fox News is breathlessly reporting this, CNN is mentioning that these stocks have been suspended or something, but we’re not day trading. So I just, I’m sorry to mock and tease, but he did put all caps. “Cody, ONE MORE TIME.”
Subscriber: Cody, Is Finisar a buy? The idea is there might be a play on Apple’s 3D sensing for facial recognition in augmented reality.
Cody: I’ve owned Finisar in years past, and it is, it’s a well run laser, fiber optic, centric company. Components mostly. I think they did go upscale on some systems, but Finisar is a … I don’t like … You guys are always asking me about these fiber optic, laser companies. Sienna or Finisar, but you know, JDS Uniphase, come back to it, man. They never recovered. They were down 99% when they went private or got bought or merged or whatever it was, and there’s still … The biggest problem with most of these companies, even in this case with Apple suppliers, if you were dependent upon Apple for most of your sales, Apple plays hardball with you. You don’t have anywhere to go. Your margins suffer when you have customers that are pressuring your margins, and that’s what the … there’s still too much competition for it, for me to … This is ironic.
Politically speaking, I want all the competition in the world, but as you’ve seen in the stock market over the last 30 years, when competition is eliminated — in food, beverage, beer, distribution, chickens, computers, software, operating systems, when competition’s eliminated, margins expand. DRAM. Flash — you end up with one, two, three companies dominating the market, and then investors really profit, especially long term. Margins expand. There’s little competition. Oligolopical economic status. Not something that’s good for the world, for prosperity or consumers, but it’s good for the stock market.
See, very much like everything else the republican democrat regime does, allowing companies to consolidate to oligopolical status is good for the stock market.
But I will say, if there’s going to be an antitrust division, do your damn job. Been saying this for 10 years, including back on Fox. Do your job, or end the antitrust laws.
On the regulation note, here’s a thought: Facebook, Twitter, Google, SnapChat — they’re going to get cracked down on the data, and it’s gonna be much harder, much more expensive to meet the regulations if you want to be a major social media company. So guess what that does?
What it does is it raises the barriers to entry. If you want to be a social media company, you have to have millions of dollars to just deal with the regulations. So it’s throwing Twitter and Facebook and Google to the briar patch. Bring on the regulator. Oh, please, don’t regulate us. Who do you think is gonna write the regulations if the Republican Democrat regime is gonna enact the law. It’s gonna be Facebook’s attorneys. Google’s lobbyists.
So there’s yet another reason to hold onto our Facebook and Google and Twitter.
I just want to remind you that politically, morally, I fight this stuff. This corporatism. This far reaching corporatism. Some might say fascism where government and businesses are being married together. Fascism didn’t originally means this nationalistic fervor. Its original definition was the marriage of government and business.
And at any rate, I fight that stuff politically and morally. But as an investor with our money, I mean, you’ve got to own the stocks. The whole system’s set up to benefit them. You can’t fight this stuff with your money. You’ve got to take care of your family with your money. So you make sure you do the best ethical, moral stuff you can do, legal stuff you can do with your money. I don’t invest in gun companies.
I’m not saying don’t buy guns or whatever. I’m not even trying to go there, but just personally, I don’t want to invest in companies that sell tools that are being used to bring death upon humankind. So then again, I own Google, and they partner with the NSA.
So you can’t even avoid it. We’re all a hypocrite with our money. If you’ve got any. Be careful out there with your money. Be strong with your politics. I don’t know.
Subscriber: Any robotics suggestions right now? I know you wrote a book on the subject.
Cody: Yeah, I wrote a book about five years ago called 12 Stocks for the Robotics Revolution. I think most of them have gone through the roof. I only own maybe one. I don’t know. I don’t have any suggestions for the robotics industry right now. Just like everything else, like I’ve been talking about, valuations are stretched, and robotics valuations are stretched and social media and … oh … and social media and just about every sector. Verizon doesn’t have a stretched valuation in my opinion. Maybe that’s one.
Subscriber: Cody, I’ve recently joined Trading with Cody, and I certainly appreciate your analysis. It has been as good as it can get. What do you think about voice revolution stock SYNA? If you had to work for a tech company, which one would it be?
Cody: Oh, two questions. A year ago I published a book called 50 Stocks For the Voice Revolution, and Trading with Cody subscribers get all my books for free. And SYNA, synaptics, is one of those stocks mentioned in there. Again, I haven’t looked at syna in while, but I’ll guarantee without looking at it, my answer is going to be … “It’s up too much for me to really want to go out and be very excited about it. I’ve still got to find your chart on synaptics.”
Wait, I just looked at a SYNA chart. Stop the press. There’s a tech stock that’s not through the roof. I’ll take a fresh look at synaptics. The problem is, I think they’ve lost some business from Apple, or the rumor to lose business from Android, or both or whatever. Heck, stock’s where it was five years ago. That’s at least worth another look. And then your other question is great, and not to mention, you started off by telling me my analysis has been as good as it can get.
I like how you phrased it though. It’s not, “is as good as it can get,” it’s, “has been as good as it can get.” Because on Wall Street, it’s what have you done for me lately. “Has been” is the right tense to use because to think my analysis “is” as good as it can get isn’t accurate anyway.
So if I had to work for a tech company, which one would it be? I don’t have to work for a major corporation. Piper and I were actually just talking this topic yesterday, that I’m, like Piper, not wired to work for a corporation. I have worked for giant Wall Street firms. I’ve worked for incubators. I’ve worked around my own hedge fund, and then I worked for Fox. I wouldn’t work for a giant tech company. I do have The IAm App, and I consider The IAm App a tech company. And Trading with Cody is sort of a tech company because I’m revolution investing in tech stocks, right? I would not work for a corporation though. I would do my best to try not to. I’m just not wired for the corporate life.
Subscriber: Bottom line, Cody, are you a decent ping pong player?
Cody: Come on, Piper. Let’s just do this here. There we go. Uh-huh. The backspin. A little backspin got you Piper. Whew, nice return. Kill shot! Kill shot.