Here’s the transcript from this week’s Live Q&A Chat including discussion on the trade war and antitrust issues.
Q. If the US’s capitalism is built on Ayn Rand philosophy and China controls all of their companies with political board positions, etc. and encourages their companies to steal IP then financially backs them, a trade deal seems very difficult as China would have to change their way of operating as a government. Your thoughts?
A. In Ayn Rand’s philosophy, none of these would exist: Federal Reserve, Import/Export bank, FDA, Military Industry Complex, Imperialism, and so on. The US is NO where near capitalism though it’s closer to capitalism and free markets than China has ever been. China will either do a deal because they are scared of losing the status quo or they won’t do a deal because they truly want to challenge the US become the most dominant/imperialist nation in the world.
Q. It is difficult to picture a meaningful short term end to the trade war. Xi’s government has told the Chinese people that Trump’s terms would be humiliating to accept. Trump no longer seems to believe the stock market negatively impacts his poll numbers with red state voters, since most voters don’t own stocks. Xi probably thinks Trump will be voted out of office next year. Trump is probably worried about being attacked by Democrats for being too soft on Xi, not for being too hard on him. (Actually, Dems say Trump failed in not building a coalition to isolate China.) Fed implies they may cut rates due to the trade war. But didn’t Cody say, historically, Fed cuts happen just before the stock market goes down?
David, good points, good write-up, thanks. And yes, I will get more defensive if/when the markets spikes if/when the Fed cuts rates finally. I should say, EVEN more defensive. I’m already getting defensive. I should say, I’m already getting MORE defensive. Not quite outright defensive yet.
Subscriber reply: Thanks Cody. If the Fed cuts rates, Trump will probably feel emboldened to escalate his trade war. Xi will probably respond by retaliating in kind. Trump thinks he can pressure Xi to accept his terms with an economic campaign of shock and awe. But one of the few vulnerabilities to Xi’s absolute grip on power is to appear humbled by a US president. The optics of a one-sided trade deal, favoring the US, would not be an option, in Xi’s mind.<
Q. Cody – Been reading grains like soybean, corns and wheat made major multi-year bottoms….you plan on adding stocks with exposure to grains or you staying away from them?
A. I think prices for much of what the world consumes are starting to go higher with more acceleration, but I think there are probably better ways to try to bet on higher inflation than just on food commodities.
Q. Hi Cody. Would love to hear your best plays on inflation? Seems like we’re really setup for inflation increase between tax cuts, high employment, tariffs, and low interest rates…
A. Open to suggestions and other ideas if any of you readers have some plays on inflation.
Q. Cody – Gold and silver looking strong last couple of days….Has the rally into year end started for metals?
A. Not sure if the rally will continue for the next six months into year-end, but certainly there’s been a good move up in gold lately.
Q. You getting some responses from the Republic.co wheel of fortune? I am curious to hear what stands out for you!
A. Yes, I’ve had some good feedback from our subscribers, but not as much as I’d expected. Please take a look at http://Republic.co and let me know which startups do you guys find most interesting on there right now? If so inclined, please include a comment about why you like the ones you find compelling.
Q. On Republic.Com I like Up Sonder after watching the CEO’s pitch on the Drapers! I should be checking into becoming a FAA certified drone operator!!! You did not respond to a part of my question, “WHAT COMPANIES HAVE CAUGHT CODY’S’ INTEREST ON REPUBLIC.COM ??? ” thanks…!
A. I will let you know when I pull some triggers. Still researching and being patient about the crowdfunding stuff.
Q. Your picks out of CRM , NOW , WDAY , TEAM?
A. I’m not in any of them, but all are highflying growth names that are going to need to continue growing quickly to maintain their valuations.
Q. PANW, is it at a point to nibble?
A. I can think of worse ideas, but then again, the stock has acted terribly all year. Maybe just a nibble.
Q. Cody – TSLA Jan 2021 $200 calls are around $45. June 2021 $200 calls are around $50. That gives close to two years for them to do something. Wouldn’t you say in two years the company would have made it or not? I am thinking of selling some recently purchased common and adding an option or two. I would think after two years the stock wouldn’t have moved sideways. What do you think?
A. I can think of worse ideas than these TSLA call options you’re talking about. They will end up worth $0 if the stock doesn’t rise 10% over the next two years whereas the stock could still be here at $180ish and you wouldn’t have lost any money on the stock itself. I do own a few TSLA call options but not dated out that far.
Q. Cody- How about TWTR? That doesn’t seem to have antitrust issues but has been caught in the crossfire.
A. I like TWTR a lot and it’s one of my biggest positions but there was probably a slight hope in the stock that GOOG or FB or MSFT might one day buy TWTR. That’s off the table now with all this new anti-trust focus on those companies.
Q. Cody, Are AAPL, GOOG, AMZN and FB now “dead money” stocks because of the antitrust flap? This will go on for a long time. Can we have meaningful stock appreciation with government looking for problems? I own all 4 and have no idea what to do? But I remember being in tech during the Nas crash of 2000 and banks in the financial crisis of 2007. It’s never good to be on the wrong side! Thanks.
A. I’m worried about a 2000- or 2007-like crash too. But I also know that these are must-own core names. Might want to trim them down and/or just make sure you’re not terribly over weighted in these names right now, but I wouldn’t run from them.
Q. Cody, if FB, AMZN, AAPL, GOOGL are dead money due to the antitrust attention, is TWTR also at risk of becoming dead money? Jim Cramer believes FANG (sans NFLX) is being targeted by Trump and/or his political appointees for allegedly being his political adversaries. https://www.cnbc.com/2019/06/03/cramer-trumps-going-after-business-and-thats-bad-for-stocks.html Left unsaid is that Trump, a heavy Twitter user, recently complained that Twitter allegedly has an anti-conservative bias.
A. I’m not sure TWTR will be safe either. I am increasingly confused by the motives and actions of Trump’s administration.
Q. Looks like all but NFLX in FANG is in some sort of antitrust/privacy probe. Should we accumulate more of FANG, or wait longer?
A. I nibbled a little bit of some of the FANG names yesterday but just gently. I’m not thrilled about their set-up here.
Q. QCOM seems to be really sensitive to judicial cases. Should we wait out until the appeal is fought out, which could take a couple of years?
A. Well, I’m not waiting for the appeals to play out. The stock is likely priced at these levels on those very concerns. Certainly more risk in the stock until the appeals and court cases play out completely, but the stock would likely be much higher before we’d get a chance to buy it if the cases do work out favorably for QCOM.
Q. QCOM is embroiled in another legal dispute after it settles with Apple. Qualcomm’s chip licensing patent business violates Fair, Reasonable and Non-Discriminatory (FRAND) standards. How serious is this going forward.?
A. It ain’t a good thing that the company has been doing antitrust activities in their business model. But 5G is likely the most important driver of QCOM stock for the next three years — not court cases. I think, at least.
Q. Hi Cody. I noticed that the Coinstar machines at my local Safeway now let you buy Bitcoin! Seems like another step in the direction of making it mainstream. Any cryptocurrency newsletters you’d recommend?
A. I don’t currently subscribe to any crypto newsletters, but am happy to hear some suggestions.
Q. Cody – Last year you dipped your pinky toe into a few cryptos other than Bitcoin. Do you plan on adding to these (or any other cryptos) anytime soon since they have dropped so much in price since then (even with the rise off the recent bottom)?
A. Yes, I plan on adding more bitcoin at some point. Not in any rush on the other cryptos just now, partly because they aren’t quite as easy to trade.
Q. Any thoughts or knowledge on Elastic ESTC?
A. I don’t know it well, but will dig in and research it some this week.
Q. Cody Any thoughts on the Voice platform (which will aim to reward content creators as opposed to the platform) recently announced by EOS?
A. Great idea whose time has come. Whether Voice and its creator Block.one can become a meaningful social network is anybody’s guess though.
Q. Cody – are the Raptors cooked? Would love to see a new champion.
A. Nah, Kawhi is good and the Warriors are tired and tense. I’d say it’s a 55% chance the Raptors win.
Ok folks, that’s a wrap. I’m headed to NYC on a redeye flight in about 14 hours from now. Will be back full-speed next week. And I’ll send out a note from NYC if anything major goes on, of course.