Here’s the transcript from this week’s Live Q&A Chat, including a discussion about how scars can shape our risk tolerance, a short-term trading request (think gold, baby), what the biggest risk to Stellar Lumens is and more.
Q. Hi Cody: I always like reading your updates, and I have been a subscriber of your service for three or four years. I have a bit of a quandary. Prior to subscribing to your service, I had tried many different ways of playing the stock market. Most notably I got burned repeatedly with various option plays over the years. As a result, I have been extremely gun-shy when it comes to investing in the market. As a result, I have never had more than about half my brokerage account invested at any one time. It’s just seemed like there was always some event lurking just over the horizon. Don’t get me wrong, I’ve made money on what I have invested following your advice. And I have been happy with the relative comfort of my sleep compared to the days of trading options. My question for you is, what should I do with my available cash balance right now. I’ve taken lots of earnings off the table over the last year, so I have only about 1/3 of my accounts invested in stocks at the moment. You have been warning of an end to the “bubble blowing market” for a while now. Assuming I am ok with increasing my investment to somewhere between 50%-75%, how should I dip my toe in? I’ve been waiting for a pull back, but the last two years have seen hardly a pause in the upward climb. Your thoughts? Aloha.
A. I got this question over the weekend and had it in my yesterday when I wrote “If you’re feeling underinvested, I suggest nibbling some of the highest-rated stocks in the Latest Positions update that I’ll be sending out tomorrow — buying maybe 1/5th the amount of shares you want to eventually own in two or three names. And then give it some time, maybe a week or a few weeks and nibble a few more shares of those and/or the stocks that are highest rated in the next Latest Positions update that I’ll be sending out in a few weeks out again.” His comment about how his past options trading scars still color his own personal risk/reward tolerance is simply a fact of life. We all have our scars and concerns and hopes and other various factors that determine your personal risk tolerance. Don’t regret that it’s kept you heavy in cash — this email knows that his heavy cash balances help him sleep at night, which means your quality of life is better than if you’d made a ton of money being heavily invested but worrying about it all the time. What’s the point of investing and having money anyway? And that’s really the gist of it but I’d also like to say thanks for the kind words.
Q. Good morning Cody, can we make some short term trades from time to time? (making use of short squeeze conditions for example)
A. I’m an opportunist with my portfolio and am always willing to make a short-term trade if I see a good opportunity with favorable risk/reward. I do think, for example, that gold and GLD are probably going to be up 20% from these levels over the next year. Three primary reasons why. 1) Rotation from cryptocurrencies to gold as The Great Cryptocurrency Crash continues. 2) Geopolitical tensions are on the rise and a year from now I think the odds are that geopolitical tensions are even higher. 3) The gold/GLD chart looks awful and sometimes that’s the best chart to buy.
Q. Hi Cody, It’s rare that you rate a stock a nine and was wondering if you still consider Verizon a nine. Thanks.
A. I hate to be nitpicky, but I’d probably put Verizon a 9/10 whenever it dips below $50 and it’s probably an 8/10 whenever its above $50. I still very much think that Verizon’s 5G can really create some upside to the company’s growth for the next five years. And even if not, at this stage of the cycle with valuations in so many stocks being so high, I’m happy to own a defensive name with nearly a 5% dividend yield.
Q. Thoughts on a stock like CALX that we know is a spec play. How do you feel about a stock that shoots up and back down 10-15% in a week with no news?
A. Hmm, didn’t CALX go up nearly 25% in a week and then dropped about 5%? Regardless, of the details, you have to remember that this is a small cap, somewhat illiquid stock, so it doesn’t take much money buying or selling to move this stock. Longer-term, week-to-week movements are irrelevant anyway — either this company wins some big contracts from VZ and other carriers and the stock rallies big from here, or they fail to win contracts and the stock will fall big from here.
Q. When it comes to a long term view of Stellar, do you see it being a store of value (in addition to it being a utility token)?
If it’s just a utility token, then it can be argued it’s overvalued here. If businesses/banks end up buying it as an actual store of value, then there eventually could be some tremendous upside, IMO. A. This is a big concern, probably the single biggest concern I have about owning the Stellar Lumens. I’m increasingly convinced that the Stellar platform is going to be big in The Blockchain Revolution, but I’m less sure about if the Lumens will function as a store of value currency from these current levels.
Q. An amazing piece Cody. If only the voting populace could grasp the government for what it is instead of what either party portrays. Thank you for this as I am constantly explaining the concept to people who are intelligent yet ignorant of the realties.
A. People are smart, intelligent but don’t have time or energy to think through the politics vs news vs reality and partisan politics and so on. One other thing that drives me crazy is when people on the so-called “right (or left)” try to make the other side villains. I mean, the only conspiracy is how the corporations own the Republican Democrat Regime and it’s both sides who missing the point.
Q. Do you think AXGN is good buy at these levels?
A. I’m probably about to nibble back some of the AXGN we sold near its highs, but part of my hesitance in adding small tranches in our existing names right now is a function of how far the market has run in the last seven years. Stocks aren’t up just a little bit, they’re up huge and Axogen is still up like 800%+ from where we bought it. And it’s still not “cheap” again. So look, I have to stick to my guns and do what I think is right. I know, I know, I know my subscribers want more ideas, more tranches, more nibbles, more excitement. But I’m here to help you maximize your returns and minimize your risks for the next ten or twenty or thirty years. And that means I’m not going to make up new ideas, force new tranches and/or otherwise enable aggressive/fast money.