Let’s get started early here. Ask me anything for the next hour.
Q. Cody, if the USA turn out to be Italy or worse which is probable, I imagine the market will have a bid negative reaction to full hospitals and the terrible stories, no?
A. Probably, but it depends on where the markets are at the time that such a reality were to exist. In other words, the markets might end up over shooting to the downside before the numbers in the USA get worse, which would mean that the markets would probably stabilize or even rally when that would happen. Clearly, this is the question we are all trying to grapple with all day for the last six weeks since the markets topped and crashed as the Coronavirus Crisis escalated.
Q. Cody, I have been a member for a while, my guess is close to when you started this service but it is hard to remember. I find all of your insight invaluable, and the $99 I pay a month just to understand your thinking, let a lone your stock picks has earned my 401k 30% to 40% returns year on year for the last 5 or so years. I consider that pretty amazing that I could not participate on any shorts or puts through the last few years, at least with that account. And after saying all of that that so I impress you in a hope for a response, my question is … Jim Cramer just went on a push to have government step in to help companies, all publicly traded. What are your thoughts on this? Trying to keep it short, because I am amazed with all you do you can respond to anything. And as a final note, the day you stop doing what you do….I will be sad. Not that I would want that to stop you doing whatever you want to do. My decision to listen to your advice over the last decade, I seriously can’t remember, has been extremely fruitful. Asking the government to step in is a drastic step he felt that they ‘have’ to do. Would love your thoughts.
A. Thanks for the kind words. I know that the markets and individuals of our nation will settle itself out in a more fair, efficient manner than the corrupt Republican Democrat Regime’s policies will ever do. The government “help” is always unfair for someone else. All these people begging for corporate welfare sure better not call themselves “capitalists” or freedom lovers. If they are doing to do anything, I’d only want the government sending $5,000 checks to anybody who makes less than $100,000 a year. The rest is just helping cronies.
Q. Can’t thank you enough for the calm you bring and level “headedness” you bring. Worth the subscription price itself. I understand generally your view of the Republican & Democratic party being largely two sides of the same coin. That said does it strike you as a mere fluke still that every Republican President since Teddy has experienced a recession during first term? A theme you have played on as well that many are not seeming to recognize is that I think when this shakes out a significant paradigm shift will have occurred (if not already). Cruise industry, fitness places, shared office spaces (WeWork), movie theaters, Starbucks (dining in), theme parks etc will all be significantly impacted adversely for the foreseeable future even post recovery. You agree? Thank you and be safe for you and your precious family.
A. Republicans can always blame the Democrats for the mess the Republicans pretend they’re cleaning up after the Democrats pretend they cleaned up a Republican mess. As for the second part of your question, I agree but some if not all of that fundamental pain is already priced into the stocks.
Q. Any thoughts on Bill Ackman’s take on this crisis?
A. Not really. I stopped watching CNBC and other TV news networks last week, so I read about Ackman’s latest meltdown, but I didn’t see it. Don’t really care what he thinks anyway.
Q. Starting a fresh new portfolio investment, have no stocks in it. I’ve been going through the latest positions from Jan 27, and many of the trade alerts. Given its a limited amount of $, what would be the top 5 to have right now with current situation and prices – assuming no day trading. What would be the ones you’d recommend to be in the look out for day trading?
A. Things are moving so fast and there are more than 5 names I like to buy and to hold onto to forever at these levels. And I’m just trading day-to-day as the pitches are thrown with these 20% selloffs and 20% rallies in individual names across the board in this market right now.
Q. Your most recent advice seems to be that it is a good idea to continue to keep some hedges on. What would you recommend at this point for someone with very little in hedges in place now? Please be specific with your recommendations, i.e., whether your recommendation is the purchase of a put option, the short sale of a fund (something else?). Suggested prices (and expirations if appropriate).
A. I’d probably stick with shorting a small amount of most of the following indices to get some hedges on (you can always just sell some stocks and sit on cash to be defensive instead of hedging, by the way): DIA, SPY, QQQ, IGV, SMH, IWM. I wrote about this yesterday: “The premium on both puts and calls on indices and on individual stocks are very high as a result of these 10-30% intraday and day-to-day swings so I’m sticking with very near-term options when I do use them, but I’m not using options very much on these trades. If you are going to buy options while premiums are this high, I’d suggest sticking with slightly in-the-money options. I might consider shorting a covered call position on a small fraction of some of our longs, but don’t do much of that or you can end up getting most of your longs called away from you if/when the markets do put on a sustained rally. If you don’t know what any of this option talk means, then don’t do options at all. If you have never shorted an index, don’t start shorting them today. For most of you at home, I’d suggest trimming some of your longs and raising a little cash on days like today when most of our Revolutionary Company positions are through the roof. I’d suggest adding to some of our Revolutionary Company positions when the markets are crashing like they were yesterday. Or I’d suggest making sure you have some cash on hand and then sitting mostly tight for the time being and let’s see what the next pitches from the economy, the markets and the Coronavirus Crisis are.”
Q. Hello Cody, Hoping to add to my hedges this afternoon to better prepare for for even more turbulent times down the road. Currently I am holding a few small put positions with SMH, SPY, DIA, dated to the end of June. Should I add the next tranch out another 3 months? Are there any new individual positions you recommend shorting and buying puts? Many thanks!
A. I’d reiterate here that shorting is no salve for this market. You can get burned shorting anything and you can lock yourself out of a lot of upside if you short to hedge too aggressively. Other than that, I’d suggest seeing my previous answer about how expensive the puts are right now. Maybe nibble a tiny of each put that you’re considering.
Q. I believe unemployment claims are going to be 5-10x the average in the coming weeks. Isn’t it possible that everyone totally freaks out and the selling increases? I’m waiting for Dow 10k, am I crazy?
A. I agree that unemployment claims will be insanely spiked for the next few weeks at least. It certainly is possible that more freaking out ensues and the selling pressure increases. I don’t think the DJIA is going to 10,000 but it certainly could if the Coronavirus Crisis impacts earnings and revenue for another year and companies even in the DJIA would possibly go bankrupt in the worst case scenario. I think the markets are already pricing in a lot of disaster though, so I’d be careful about looking for another 50% drop from these levels after we just dropped 30%. But everything you say is also possible.
Q. Can you elaborate on gold during these times. As it is no longer attached to our currency, it seems its only purpose is tied to fear of banking failures. During inflation, wouldn’t assets increase in value, and therefore a contraction in dollars (like during a depression) would suppress asset values? How would gold rise in an environment where food and shelter are king and everything else would be crashing in value as people retain whatever of their currency they can get their hands on. It seems to me people’s rush into gold and silver is irrational unless the entire banking system collapses. Gold has not seemed to be a great hedge against inflation, at least in comparison to other assets as gold bugs proclaim.
A. I’m not betting on gold doing any particular thing for the next few months, as I think it will slowly increase in value as the fiat currencies of the world ever decrease in value. People could use gold flakes from their coins to buy food and gas if the dollars become worthless because our system failed. But I don’t think that’s very likely or a reason to own gold at all, really.
Q. Do you anticipate market stabilizes at this level or there is still downside especially once companies start to report earnings?
A. Stock market stabilization will likely depend on Coronavirus Crisis not getting any worse.
Q. Cody you have said to stick with stocks with strong balance sheets yet when you are purchasing there seems to be one glaring omission. Can you give comments on your thoughts on Apple in the short and long term. Why hasn’t that ben specifically listed as a stock you are nibbling on when that has one of the strongest balance sheets in the world.
A. I’ve owned Apple for 17 years and its up 250-fold over that time. I still hold AAPL and its balance sheet is as good as it gets. But I’m also worried that Apple’s going to have to spend a bunch of money over the next few years to get its supply-chain to be less dependent upon China. Regardless, I think AAPL is a core holding for any investor and I’d probably buy some more if it gets slammed in weeks ahead.
Q. I realize everything is on sale now, but which names have the best risk / reward currently. Top few please?? And: Cody. In one year from now, if the CV19 is over, and almost forgotten, which stocks do you think would be the biggest gainers from today’s prices. And: Can you please play FTF if you had to buy only 5 names right now to hold for long term, which would they be?
A. See my answer above — I’m not sure there are just five names here. Everything is changing and moving so fast with the economy, the fundamentals of these companies, the prices that the markets setting these stocks at, etc. I think you want to nibble broadly and slowly if you’re a long-term investor.
Q. Guessing a bottom is futile, but what would be your guess on how much further to fall? If any further…??
Q. What’s your tax lot strategy when you’re trading day to day as we are now. For example, today trimming some of the names we bought yesterday: are you selling the lots you bought yesterday for a quick gain or are you selling higher priced lots and lowering your cost basis overall?
A. My brokers are supposed to be making sure they sell the higher priced cost basis shares whenever possible. You can probably sell some stuff to lock in some losses along the way before this year is over if you’re starting to build some short-term recognized gains in the portfolio. Focusing too much on taxes will cripple your trading, but ignoring taxes isn’t smart either. Taxes are another reason I tend to stick to long-term Revolution Investing stock picks instead of short-term trading.
Q. 2 up days in a row?? Futures higher. Seems impossible. Seems like years ago that this happened. I pray for the bloodshed to stop. The whole country is slowing down. How about slowing down the extreme volatility in the markets and giving us all a break. Thank you Fed, Congress, the powers that overlook our financial system. I’ve been beaten down yet I keep the faith and have hope.
A. I have to admit that I have little faith that the Federal Reserve or the damn-near-broke-but-not-as-broke-as-the-other-nations government of the USA is going to be able to save its own system without the people, individuals, entrepreneurs and even corporations who will actually do what needs to be done.
Q. Hi Cody, Thanks as always. I’ve been trying to follow the playbook and have for the most part, although gone in too heavy at times. I’m now doing it a little more successfully. In particular, these short-term options seem to be working fairly well. My question is that I bought some short-term SPY puts yesterday that are up 40%. Would you recommend trimming/exiting? thanks!
A. I don’t know how the rest of your portfolio looks, so I can’t advise so specifically. I’d suggest making sure you keep some hedges on and I don’t think you’re trying to game 40% moves in the puts when you buy them. For what it’s worth.
Q. Anyone see Cisco CEO Chuck Robbins on CNBC on Tuesday 9:12 am? His Webex from what looks like his house sounded like he was in a tin can. Also been my experience with Cisco, not robust and they really lack support for all products. Lack of support as in they aren’t quick to answer issues with products quickly or efficiently. I have seen this first hand with a billion dollar corp that uses Webex and their DMP (digital media players) with their stadium vision platform. Other subscriber: Zoom far superior to Webex, but I’m certain Webex usage and probably sales are up.
A. Yes, I think you both correct that Zoom seems to be much easier and more reliable and higher quality than Webex video solutions. That said, yes, Cisco’s Webex is probably also benefitting from the complete work-from-home situation developing across the US and world.
Q. Can you please address later why almost every short requires 0.25 – 1% borrow fees now in all major brokerages? This is even for stocks & ETFs that are plentiful to borrow out there. I’ve never seen anything like this! Does this mean that the concensus are shorting out there? And I also heard there have been major leveraged long hedge funds in trouble that caused those wild intra day swings & capitulations such as Citadel fund. Is this true? Will there be more capitulations to come?
A. Pretty much most shorts will always cost you a little bit of a borrowing fee and right now there is definitely an increased demand for shares to borrow and sell short so borrowing fees are probably a little higher than they were two months ago.
Q. Your thoughts, if they’ve changed, on gold as a refuge investment in these times. I guess I get that having the real stuff is good, but why do you think it has been (to me, anyway) a surprising non-performer on the market (GLD, for example) in this environment? Thanks.
A. The gold trade got crowded as the panic around the Coronavirus Crisis escalated. Recall that I’d sent out a Trade Alert that I was selling some of my GLD when it was near its highs a few weeks ago, partly because I thought the gold trade looked crowded. GLD and gold are down now and I think they are probably good buys again both for the short-term in addition to gold itself being a long-term forever holding (GLD, being a promise of gold by a bank, is not a long-term forever holding).
Q. Do you think that TSLA is vulnerable to the massive drop in the price of oil? Won’t consumers opt for gas rather than electric? I know i would and did.
A. Wait, you know about the Tesla cars and you chose to buy a gas car that won’t ever be able to drive itself or even update its systems? With an engine that can break? Tell me you didn’t! I honestly can’t fathom that someone would choose a car that’s not a Tesla when they know a Tesla exists. What kind of car did you get instead? Do tell, please!
Subscriber answers with Nissan Murano.
A. Nissan Murano, costs about the same amount as a Tesla Model 3, and is no way nearly as comfortable to drive or sit in the passenger seat as a Model 3 (I’m sure the back seat comfort on the Murano has to be better than the back seat comfort in a Model 3, which isn’t great), and WILL NEVER BE ABLE TO UPDATE ITS SYSTEMS OR DRIVE ITSELF SOMEDAY LIKE THE MODEL 3 WILL. So to go back to your original question, I can’t really imagine that most people who want a Tesla are going to change their mind because the price of gas at the pump to fill up a car that is a non-Tesla might be a little cheaper for the next few months than it was last year. Certainly, there are people who won’t buy a Tesla or any car at all until after the Coronavirus Crisis passes, but I don’t think gas cars are even competitive to a Tesla car as consumer products.
Q. Cody, thoughts on VZ nice dividend yield lots of volume increase during these times and still a 5g play?
A. I’m not sure VZ or the others are going to be able to spend the billions on 5G that they were planning to this year and next. Also, is 5G and its ability to bring you the same speeds that you get from Wifi at your house even important, if you’re going to be spending a lot more time at your house anyway.
Q. Cody. Thanks for everything you do. I have been surprisingly calm through all this. Coming out of this pandemic on the backside, obviously our world as we know it will be different in certain aspects. Although I believe home delivery was slowly being adopted by some people and parts of our country it will blow up after this. What are your thoughts on some of our drone plays from a few years back? Do you see companies ramping up delivery with drones?
A. Great question! I’ll go back and look at my old reports and ideas from The Drone Revolution.
Q. Adding to CSCO here? I’ve been burned so many times with CSCO I have an eye tick. Made it a larger position, downgraded today by JP Morgan.
A. I added to CSCO the other day on the crash. I trimmed some CSCO this morning. Following the playbook.
Q. How does AMZN come out of this not benefiting and people not being more dependent on them? Prime memberships have not doubt spiked, whole foods delivery, twitch watching, AWS, pharmacy, drones, and their overall selection of goods. I imagine VR will also start getting more attention now.
A. Yes, agreed, but we aren’t the only people seeing that and AMZN’s stock feels a little crowded right now too, frankly.
Q. Hi Cody, hope you and your family are doing well. Has been a stressful and crazy 1.5 months. The markets still look to be in a bear market for now. Seems like the virus has a lock on the market until an effective treatment and/or vaccine is found. How much cash should we holding at this point as it doesn’t look we are at the bottom of the bear market right here. Any bites on the travel industry stocks in the future? Take care everyone and stay healthy. Thanks.
A. No easy answer on how much cash to hold, it’s different for each of you based on your risk tolerance. I’m not looking to invest in travel stocks, unless we can find one that’s truly Revolutionary.