What a chat we had this morning. You’ll see below how many topics we ran though and I left them in the order they were asked and answered as there was an interesting “flow” to the chat itself today. You’ll see an undercurrent of worry with a little contrarian bullishness in the questions. There’s even some humor, some happy feelings about a subscriber going home to Vietnam for Christmas and I hit you guys with all the analysis I can muster.
Q. Second downgrade by major analysts of VZ in the past week. Does their analysis change anything on your end?
A. I always read any reports that I can get my hands on, so it’s possible that the analysis in a downgrade or two of VZ could end up changing something on my end of the analysis, but usually not. Remember all the times I’ve gone against all the analysts on a stock and had good results doing so. Sellside analysts are typically people who just want to stay in the lane and keep their jobs without rocking any boats or providing anything that would help you outperform the markets.
Q. Cody, Just want to say THANK YOU for your trading ideas, I have a small account but made enough profits for my family to go home to visit my family in Vietnam this Christmas whom we haven’t seen in 10yrs. Just want you to know that what you do make a difference in other people’s lives. Best wishes to your family. Merry Christmas and happy new year!!!
A. Whoa, that is the best kind of feedback I could ever ask for. Safe travels and hug and kiss everybody in your family every chance you get please. Thanks for the kind words and letting me know.
Q. Hi Cody, While some stocks are currently in a bear market technically (20% decline from their highs that’s sustained for a period of 2 or more months, please correct me if I’m wrong), the DOW, S&P and NASDAQ have yet to hit bear market definition. I’ve often wondered how would you get us subscribers “safely to the other side”, out of harms way of a bear. Part of your strategy is to take profits on the way up, while things are good, rather than making an outright bearish call to clear the decks, right? It seems to me if it’s the latter, much damage to stock prices would’ve already occurred. Other than hindsight, I think it’s hard to know the difference between what at first appears to be a health restoring correction but actually ends up ushering in a bear market. I would love your take on this. During this correction, I normally wouldn’t be as concerned as I am now about a bear, but in this environment w/economic and Fed concerns, the unresolved trade situation w/China, and the wild market volatility, I’m feeling more bearish than bullish. Thank you — and Merry Christmas to you and your family! Oh… and congrats on launching your hedge fund!
A. A good but layered question. Let’s see what I can do for an answer. Most stay at home investors need should have raised a bunch of cash in the last year and maybe put on some put hedges. That’s what I’ve been preaching and that’s what I’ve been doing and that’s what will get most investors “safely to the other side.” I don’t expect that most at-home investors will be able to move completely to cash and/or go net short when the markets turn down, but we certainly have avoided much of the pain this year unlike most investors and traders who have been hurt by the stock markets’ downturn.
Q. Market Watch technical analysis says they have still not seen that whoosh down (extreme market capitulation). I would agree with that. Cody can you comment on this if you have time?
A. I’ve said something similar the last few weeks during this market sell-off and I keep my hedges on partly because of that. That said, yesterday’s action was certainly a bit wooshy downy so it’s possible markets put in a short-term bottom here and rally at least into year end.
Q. Cody, is the Qualcomm lawsuit against Apple going to result in another leg down for Apple? It sounds like they will have to negotiate a settlement, that going to court is not really an option.
A. I would think that any resolution between QCOM and AAPL would actually help the stock. The unknowns of the fight between these two is what makes the market uncertain and that’s what the markets don’t like.
Q. Cody, can you give us some insight into hedge funds closing up shop and its impact on the market? Do you think this selloff over the past several weeks has a lot to do with that?
A. There are always factors like forced selling or buying from money managers. I’m not sure how much of that action has exacerbated the recent market sell-off vs how much the recent market sell-off has exacerbated the forced selling from money managers though. Reflexivity is an unavoidable fact of the markets.
Q. Cody, would like your thoughts on NFLX. It’s hard for me to square this analyst’s analysis during this climate bc it could get a lot worse for a lot longer, he’s calling for a 12m time horizon. Barron’s: The recent dramatic selloff in Netflix stock is a great buying opportunity, according to MKM Partners. The firm’s analyst Rob Sanderson reiterated his Buy rating and 12-month price target of $415 for Netflix (ticker: NFLX) stock, predicting surging earnings growth through 2025. We think the stock has been victim of a risk-off environment since Q4 began,” he wrote on Monday. “We think that fundamentals and earnings potential remain as strong as ever and that macro-related weakness is creating an excellent buying opportunity.”
A. The way to analyze NFLX is to do this math. How many hundreds of millions of people around the world will pay $15-20/month for endless amounts of exclusive content? 7 billion people on the planet, let’s say NFLX gets 8% of them. That’d be 500 million people. 500 million x $20/month is $10 billion. That’d be $120 billion a year in sales. Throw a 3 multiple on that and you get a $360 billion market cap. NFLX right now is worth $115 billion market cap. So I expect the stock could triple to $750 in the best case scenario for the company. But I don’t think it’s a sure thing that NFLX gets to 500 million users paying $20 a month, so there’s risk to that best case scenario obviously. Near-term, NFLX is likely to be a high-beta version of the broader tech stock market.
Q. Cody, what’s next for Mr. Market? Are you looking to start adding to your longs any time soon? Thank you!
A. I’m actually re-reading and making notes and will write up some analysis on Benjamin Graham’s classic books where he created the term “Mr. Market.” My best answer to what’s next for Mr. Market is that starting today, I’d expect rangebound action with a slight upward bias into year-end. As for whether I’ll start adding to my longs any time soon, the answer is probably. I’ll nibble opportunistically and maybe sell a few put hedges too. But I don’t think the stock markets are all clear sailing next year and I’m not likely to be building up my longs aggressively just yet.
Q. Hi Cody, what s the answer from your “Magic 8” spreadsheet if you put the NFLX symbol in? Is it yet a buying opportunity?
A. It ain’t magic and it’s ain’t just a spreadsheet. But my WiNR Ration program kicks out a slightly-below average rating for NFLX at these current levels right now. The risk factor comes in very high while the potential upside from these levels comes in pretty good. Below $200 a share, I’d probably get long NFLX though as the WiNR Ratio would come in quite high at those prices as long as the fundamental picture holds.
Q. Hello Cody – is it time to buy another tranche of XLM ?…BTC did get to almost 3k as you predicted. Nice.
A. I can think of worse ideas than buying a little tranche of XLM Stellar Lumens cryptocurrency right now. Just small tranche though.
Q. Is gold ready to breakout?
A. Depends on several factors, but you know I believe gold is likely to rise this year and especially over the next 10-15 years.
Q. Cody – do you recommend physical gold coins or bars ? Where do you suggest to purchase them? Thanks.
A. (From another subscriber.) Here’s his book on how to buy gold/silver: https://tradingwithcody.com/ebooks/everything-you-need-to-know-about-investing-in-gold-and-silver/ He’s also said he uses sources on eBay like APMEX that he’s used to buy gold/silver. Here’s an interview he did with the APMEX CEO: https://soundcloud.com/cody-willard/cody-underground-episode-14
Q. Earlier this year I believe you mentioned you were involved in some sort of crypto project (could be wrong though). What ever happened with that?
A. It’s coming along quite nicely as the company didn’t rush out to the retail market and the money they’ve raised from their crypto offering has been from big VCs and other institutional investors not looking for liquidity. The crypto that I’m affiliated with is backed by equity in lots of start up companies. I’ll explain more and reveal what the crypto is and how Trading With Cody subscribers can get a piece of the action in coming weeks.
Q: Do you view that China’s economy will have more growth than America’s economy. in the next 30 years? I am aware of your position on Chinese company stocks. When do we start gaining exposure on that front? What indications will you look out for as the time to step into the Chinese market?
A. No, I don’t think there’s any chance that a communist corrupt regime will ever be able to challenge the growth in the US economy long-term. I might at some point get long and/or short some individual Chinese stocks (and/or ETFs) but as a general investment theme, I doubt I’ll ever be willing to risk big money in a communist system.
Q. If Trump is impeached, how should we play the market?
A. I doubt he gets impeached. If he does, you’ll probably want to be short the market until the week of the actual impeachment and then you’d probably want to start buying and get long.
Q. Cody, I bought SNAP last month when you sent out the trade alert, now @$5.60,, it keeps trending lower and lower, how long are we going to hold this loser? please update, thank you
A. I’m probably going to ride my SNAP for at least two more quarterly earnings reports. I’d like to see if the company can benefit as the only viable non-Facebook-owned social network in the US.
Q. I am not chart reader by any means but if you look at the charts of most companies from JNJ to AMZN they all are pretty parabolic starting in 2013. To me there is a lot of air in there and big risk for much more downside. Matter of when not if. Now that I said that, it might be a good time to buy as contrarian.
A. Haha, and yes. No? No, yes.
Q. Seems like a three horse race in the NFC… who ya got… Bears, Saints or Rams? Or a surprise?
A. Saints will win the NFC and win the Superbowl IMHO.
Q. You’ve said that Bitcoin could go as low as 1-2k. Talking potential survivors, (but knowing it’s more difficult without earnings/balance sheets to go by), do you have any thoughts on how low XLM, XRP & ETH could go as the Great Cryptocurrency Crash plays out? (At some point I think I remember reading .05 for the Lumens)
A. That’s the big problem with trying to guess a point at which cryptos (that don’t have balance sheets or revenues or book values) will bottom. Their value is more ethereal or perhaps, crypto’d, than that. “Lower” is my answer as to the levels I expect they will bottom at.
All right folks, that’s a wrap. Thank you