Here’s the transcript from this week’s Zoom Video version of our Live Q&A Chat. Click here (or on the picture below) to watch the transcript instead of reading it.
Cody:
Welcome to another episode of the Trading with Cody live Q&A chat over Zoom. Let’s jump in and to be completely frank, it’s been a tense couple three months now with the pandemic and the shutdown, and clearly with the nation having been being burnt with police and protestors going at it, I don’t feel very humorous and jokey and bullish and et cetera.
Now, clearly, we need to separate, we always need to separate the market and valuations and reasons the markets might move the way that they do from our feelings. Feelings are irrelevant. Feelings are the enemy of the trader. A good investor does not invest based on feelings. We’re not here to feel good with our money when we’re investing it. You can do things to feel good with your money but when you’re investing, it’s not about adrenaline, it’s not about matching the market, your positioning in the market with your mood.
I just do want to hit on, for a second, away from the market, just as a citizen of the world and communicating with people that are in a community kind of thing with me that you guys saw what I wrote last night about being empathetic and the importance of being empathetic when you’re trying to be an analyst but even beyond that, just being a good citizen, a good citizen of the world and good citizen of the United States and I empathize with police officers, white and black and Mexican and Asian and anyone else who is in the police force and frankly, I give free Trading with Cody subscriptions to police officers when they ask for it.
I’m not as vocal about it the way I do give free Trading with Cody subscriptions to active members of the military but an active police member is putting their life on the line every day but of course, I 100% empathize with oppressed people and the fear that my friends who were not raised in rural suburban middle class white neighborhoods feel on a regular basis every day. Fear of driving across the country with your family if you’re black because you can get pulled over and that’s a lot scarier if you’re black than if you’re white. If it’s one in a thousand that a black person has something bad happen to them every time they’re pulled over, well, that’s still one in a thousand. It’s one in a million for me. So empathize, empathy and I want to change.
I’m not satisfied with the status quo. I want a better world for each of us and all of us and I don’t know what the steps are to get there yet. I know transparency is key to it somehow. I know accountability is key to it and I know somehow creating opportunity and leveling the societal playing field for black children, girls, six years old, seven years old, like my daughter being six years old and the recognition that the Disney Princesses are all white and the two that are black, one’s Samoan or something and her song is, “What’s Wrong with Me?” And the other princess who was black turns into being a frog in the first five minutes. So then being a parent to a black child, trying to be aware of lessons and that alone is limiting the opportunities to each black children the otherwise positive themes of Disney films. And it’s about a level playing field, just that Disney situation, little girl princesses, beyond the police thing, beyond all of that. And I want to empathize.
I want to understand and I want to try to figure out the structural changes we could maybe change to get there, and we can do better. And being vocal and coming together and trying to figure that out is part of what’s going on right now and I’m hopeful that the world, the United States itself, can take advantage of this moment somehow to do something beyond republican and democrat partisan silliness, and maintain the structural status quo of all of its inherent problems.
I got emotional as I talked about it all. Like it is related to the markets and the economy too and is what I wanted to say. I mentioned last night I’ve tried hard to be anti-racist my whole life. I, from the age of probably 14 or 15 years old would not allow friends of mine to use the N-word around me. Not that that’s some big badge or something. My god, again, let’s empathize. This isn’t about how I’ve done something right or something to make myself feel better but watching and having that visceral eight-minute video of someone having a knee on their neck for eight minutes and yesterday, I stopped by a protestor in Ruidoso and saw everybody knelt down for eight minutes. And you don’t know how long it is to even just kneel down in the same position for eight minutes, much less trying to keep your balance on someone.
And that’s what makes me realize that the fact that they would … That the four police officers in that situation were not fearful enough of their own consequences for these actions that they would be filmed and know they were being filmed and listening to people asking them, “Please don’t do this,” the structural issue that enables that makes me understand that I don’t know just how bad it really has been for my black friends, no matter how hard I’ve tried to be anti-racist, and I want to be better. I want this world to be better and I will try and again, I don’t know, just like you guys. We’re all black and white, Asian, whatever, we’re all, as Americans, sitting here struggling and emotional and trying to figure out how can we improve this situation together and I don’t have the answers either but I’m willing to work with all of you and each of you and let’s stand up and be better. Let’s change the structure.
We know that there is a racist problem when you see that video. You can’t hide from it. I can’t hide from it. I didn’t mean to preach. Let’s try to talk markets now but I’m open for questions.
Subscriber:
Cody? SpaceX, watching the launch was awesome and the return of that rocket to the … On the ocean, to the boat, was unbelievable. Quietly, they launched another 40 satellites in their quest to put … I don’t know what the total number of satellites is but I think they have 480 up there now, so they could give internet to everybody in the world. How big a part of SpaceX is the satellite business?
Cody:
I’m reading several books at this moment about the space revolution and these things and just this morning, as I was getting up this morning, I was reading a little bit out of it and it talked about how Elon … And this book was probably printed three or four years ago but he talked about how Elon sort of spent the first five or 10 years building and blowing up rockets and then hoping he would figure out a business model to build around it. The answer to your question is in the very near term it’s really almost no part of their business.
It’s a fringe thing that they’re doing because they’re practicing in sending up satellites and they’ve got payloads they could send up but the bigger point is probably exactly what I’m getting at with that book mentioning that they have the technology. You build the platform for getting things to outer space cheaply, you own it, you are vertically integrated and now if you can figure out services and applications that can run on top of the space revolution, then you’ve got real business potential, real growth, trillion dollar businesses.
I think he was talking about 10,000 of these little satellites, thousands of them for sure. I can’t remember off the top of my head at the moment but were there … If they’ve got thousands of these satellites out there and they have the ability to deliver high speed, low latency broadband service to seven billion people no matter where they are on the planet, that’s a pretty big business proposition right there. So, it could be a trillion dollar business in its own right, the satellite internet delivery business but near term, SpaceX is paid billions of dollars from NASA and others to ship stuff and blow stuff up, to send stuff, not blow stuff up, to send stuff up to space.
Next question?
Subscriber:
Hey, Cody.
Subscriber:
Former Seton Hall Pirate here.
Cody:
Hey, hey. You were in my class?
Subscriber:
No, no, I wasn’t, unfortunately. I think I missed you. I graduated with an MBA in ’95 and I think you taught after that.
Cody:
Yeah, I didn’t get to New York until ’96.
Subscriber:
That’s right, that’s right.
Cody:
Go Pirates.
Subscriber:
Go Pirates, Pirate Radio. I was wondering what your thoughts were around gold here. Is it a good investment or is gold about to have its 2013 moment where households are deleveraging, unemployment is high, people are shifting into stocks, into mortgage derivatives, where your thoughts were about does gold belong in the portfolio?
Cody:
It does and to be clear, gold is a permanent core holding in my portfolio, both the hedge fund and in my personal … I don’t consider gold even a part of my portfolio really. Gold is … The actual physical gold I own is almost like structural itself, it’s fundamentally. I don’t consider it necessarily a way of building wealth, although I do expect gold will rise. When I started saying this, gold was at like 1200 to maybe a thousand and I’ve long said that I think gold will go up five to tenfold in my lifetime, $5000 or $10,000 an ounce.
I think I’ve mentioned lately I’ve studied the Russian revolution quite a bit lately and there’s a quote by Lenin that you just made me think of. I’ve been using it anyway in regards to our society and its situation that “Nothing happens for decades and then decades happen in weeks.” And that’s sort of what you see with gold sometimes. It sits there and maybe has some trades between 1000 and 2000 and can go on like that for a decade or two and then all of a sudden, it can reprice itself because of structural changes, because of trillion dollar bailouts and who knows what else crisis, financial crisis come along. So, given that, I just think someday we’ll walk in and gold will be repriced at three grand, four grand an ounce, doesn’t mean it’s this week or this month or anytime soon but I do think longterm, gold is something good and today it’s down 2%, it’s down, I don’t know, probably 5% or 6% from its recent highs and it’d be a good time to nail some if you don’t have some.
Subscriber:
Yes. I had a question. I’m looking at the market and something doesn’t add up. I mean the coronavirus, I’m in Philadelphia and now the coronavirus hit, stores are closed. There’s no business going on. The market went down and then it started going up, and this week, with everything going on, stores were all boarded up. Business has come to a halt, at least in center city Philadelphia and the market’s still going up. I’m looking at these two major things occurring and maybe I’m … Not everyone is involved as certain people are but it’s just I don’t understand why the market continues to go up and today, I’m not an analyst or anything. You may call me like a retail trader or so on but it’s up 700 points and I just keep looking at what’s going on and every business is, at least in our city, is boarded up. I can’t justify what … Are you able to [crosstalk 00:20:06]
Cody:
If you reconcile the reality on the ground that you see with the action in the stock market, so let’s tool down. I’ve got probably four or five different points that we can make that can explain how this is happening and then, of course, always the question is or it’s almost irrelevant how we got to this moment. It’s now what happens going forward. What are the risk/reward scenarios going forward? Now, reasons for the market being on a tear, number one, perhaps it crashed too far, too fast initially. So the base that we’re coming off of got to be really low and clearly it was, right? I mean it was at 35%. It was a world record … The rapidity with which the market crashed 35% was faster this time than it had ever been and at the time, in real time, we were talking about how that is probably some of Kurzweil instantaneous money moving, real time, mankind moving at different speed so that what used to take years takes days now. So, that’s one. Market was so low, we’ve come back.
Next, people will always try to explain that the market is looking out six months, nine months or a year ahead. That’s all fine and dandy but as you’ve seen me ask before, like what was the market looking ahead six months … What was the market looking at when it hit the bottom in March? Clearly, it wasn’t looking out six months if now it’s looking out six months and we’re back to where we were because it gets so … Okay, so I’m not sure about either one of these.
Let’s go to next, federal reserve printing trillions of dollars. Well, trillions of dollars, the whole stock market valuation is a couple 20 trillion, a couple 10s, maybe 30 trillion, tens of trillions of dollars, low tens of trillions of dollars. So you print four or five trillion to send it to the banks. You send out $1200 stimulus checks, all that’s aiding the asset inflation. Then, as we’ve talked, you’ve got millions of people, for the first time ever, were sitting around at home and couldn’t gamble on baseball or football or basketball and couldn’t go to the casino and got whatever … I can’t remember what the amount of checks, $1700 or something, $1200 and now you’ve got I’m 22, I’m living at home, I’m going to go play the stock market.
So, when millions of people times thousands of dollars go into the stock market all at the same time, now you’re talking trillions. I assume we know how to do math but yeah, a trillion dollars, so yeah, two trillion, multi-trillion dollar factors blowing into the stock market right now regardless of economic activity, regardless of valuations, regardless of anything, those two factors are … And so, that’s how we get there. That’s why there’s a disconnect seemingly. Any or all of those reasons are your answer, probably. It’s my theory anyway. It’s my answer to your question.
The question, of course, is now where are we going and as you know, I just don’t like the risk/reward about being aggressively wrong here. We’ve had … Our biggest position is Tesla. That thing is up more than double this year. We’ve had some … Knock on wood and we’ve had a lot of good stock picks that have really done well. Even our small capped DVAX thing. That thing has been on a tear and had a chance to sell it for double at one point after we bought it three weeks later. I mean this thing’s … Those alone sort of make me uncomfortable. It’s not supposed to be like ah, buy another stock and it goes up 50%. Hey, we got a double, yahoo. No, that’s not going to be fun all the time. There’s going to be some pain.
So, just … Look, I’m not saying get short. I keep telling people, look, I don’t care, I’m not quite bearish, I’m just as close to being bearish as I’ve been in a long time, so I stay a little bit net long, I’ve got lots of cash, I bought some bitcoin. I buy a little gold and I’m keeping cool. And I don’t worry … I told my wife, actually, the other day when the market was like this. It was up a whole bunch and the world was burning, Monday morning maybe it was. And I said, “I’m glad I don’t think the stock market’s supposed to make sense all the time. Because it doesn’t. It don’t. Next question.
Subscriber:
Regarding Slack, it got ahead of itself but I don’t know if you saw the CEO on CNBC this morning but I was so unimpressed by him. He was stammering and stuttering a little bit. He wasn’t enthusiastic outwardly about his company. It was very disappointing.
Cody:
I’ll watch the interview but I’ve seen him. I don’t dislike him or something. You nailed it though. The stock got ahead of itself. The valuation at 40 … You guys [inaudible 00:26:43] talk about it. It got stretched. You’ve got to trim some of it. I’m not buying any back today. I’ll let it settle down. I still think … The key to my bullish analysis on Slack is two-fold. The product is pretty dang good and it’s totally open, tied in with Zoom or anything else pretty much you want to tie into it, apps, other services. It’s great.
And then the fact that they don’t have very many paying customers yet, because I do believe that the corporations that start using it get locked in and one of the best books that you’ve heard me talk about many times is called Information Rules and it has probably seven or eight principles that technology companies use to create the out-sized gross margins that they’re able to generate compared to any other business in the history of the planet and a lot of it has to do with monopolistic type of things including locking your customers into your platform and once you get them locked in, you can keep raising prices and usually, your cost will rise commensurately and you end up with very high gross margins.
Yeah, so I stick with Slack but I wish I’d trimmed even more. I trimmed some two or three times in the last week or two and even this week, a couple times when it got close to 40. I think I got one little trip like 39.87 but it was a tiny fraction of the position and darn it, could’ve bought it back today aggressively if you’d sold it all. Again, the idea that you could do that consistently over 10,000 days and not miss out and your biggest positions longterm is … You can’t do it. Next question.
Subscriber:
Good morning, Cody.
Cody:
Good morning.
Subscriber:
This is Brian, from Arizona. I saw that video that you had a panel discussion on negative interest rates. All right, so I saw that panel discussion that you provided the link for about … With those economists and professors. I mean it was on negative interest rates or became that later on but I’m narrowly convinced and it’s hard to ever predict the market. I was just wondering what your thoughts are in the future, if we’re headed towards negative because I’m almost convinced, if you look at rates, I mean you can’t get much for any savings of any cash. So it’s hard.
Cody:
I got distracted a second because you were shirtless when you popped up in the camera.
Subscriber:
Oh sorry, yeah.
Cody:
But I did re-collect my brain and get back to the question at hand, so I did actually follow negative interest rates. No, look, I don’t think they’re coming to this country. I think the problem … I think this country’s probably about to be surprised and I think the globe is about to be surprised with higher interest rates. Let’s think it through a little bit. Okay, there are a lot of factors that determine what an interest rate is, right? The governments themselves or fiat currency nation can control somewhat but in the end, free market forces always exist whether the government push them into a black market or suspend them temporarily, the balances of the universe … Again, you can call it god, you can call it economy, you can call it a system, you can call it this universe but it balances at some point. Money goes, seeks profit and people seek security and peace and those things you can push down but they always eventually either violently or gently ebb back to balance and so I think we’re at the end, the exhaustion of low rates.
The idea that governments around the world, not yet in the United States but in other countries are able to use a system that is so corrupted and inefficient that people are forced to lend the government money and get less back at the end of each year, it’s broken when that happens and so again, you can do it for five years, you can do it for decades maybe but eventually it’s going to … Then the next thing I want to say is let’s think about how that … What is the most important force, then, in interest rates? The demands of the people with the money. The people who are willing to lend it and so in this system, when other governments are forcing people, their own people, to lend the government money at negative interest rates and get less back at the end of each year, that money is trying to come to the United States where it can at least get one set per dollar back at the end of each year.
So, we’re able to sort of keep our interest rates somewhat positive and have free printing of trillions of dollars because interest rates are so low but then is it scarcity of money that will eventually drive interest rates up? Supply is the money. Demand is the corporations and people and governments that borrow the money. Demand is always there pretty much. Supply is just so much right now. Print, print, print, borrow, borrow, borrow, print, print, print. The velocity of money has been good too so it’s all floating around, especially in the United States. Other countries, not so much.
But if and when that velocity of money stops and there’s more hoarding of money and more saving and less willingness to lend the United States Government $100 or $1000 or $1,000,000 or $1,000,000,000 at a 1% or a 2% interest rate, so at some point, I am … Like with gold, even more so than with gold repricing itself, in my soul I feel fully conviction that interest rates will be much higher in my lifetime at some point and I’m talking 5% or 10%. That would be higher, a lot higher than 1% but I think there’s … I don’t think … I cannot, in my mind, imagine that these pieces around the world of fiat currency and gamesmanship and monetary policies and bonds and trade and all of these balls stay up in the air for decades, long enough that interest rates stay at these levels in an unnatural manner.
Subscriber:
Thank you, Cody.
Cody:
Thank you. Put a shirt on next time, Brian.
Subscriber:
Are you still short the bonds, the long bonds?
Cody:
Nice, nice, Brian. Nice.
Subscriber:
Are you still short the long bonds?
Cody:
I am, Joe, yes. We’re short TLT, covered a little bit today. I mean that TLT is essentially it moves inversely with the interest rates that the government pays on 10 or 20-year treasuries and so if you short the TLT and rates go up for the government, then you make money. The TLT has gone from 169 maybe three weeks ago, two weeks ago, today 154. Nice little vacuum, not a vacuum but it’s just been a slow letdown as rates seem to be creeping up however little bit now. I own some puts too, so I’m ended up with some [inaudible 00:36:10], I’m getting up some leverage. It gets bigger as the TLT falls and I don’t want to have too much exposure to a TLT short after it’s already funneled 10%. So covered a little bit. Next question.
Subscriber:
Hey, Cody. When you’re hedged like you are currently, what percentage of your portfolio is dedicated to short hedges? For example, would you consider yourself market neutral right now? Is it a 70/30 split and are you ever net short?
Cody:
I don’t hardly ever get net short. I’ve gone to cash. I closed a hedge fund in 2007 at the top and went and took a job on TV but I didn’t go net short which sometimes it’s one of my biggest regrets because if I would have just gone net short and not gone on TV, I think it might be better to be very wealthy than to be very famous, not that I’ve done either. But if I had to strive for one, I think I’d rather have wealth than fame. I didn’t like being famous, almost famous. I was a D-level list … I went on [inaudible 00:37:47] once, woo-hoo. I was almost famous, man. People almost recognize me sometimes. Point being, I forgot your question because I started talking about myself.
Subscriber:
Oh, what percentage are you currently hedged? How much are you net long?
Cody:
Look, I don’t want to give you … I never give percentages because it’s so misleading. The hedge fund’s different in my personal portfolio. My personal portfolio should be different than yours. Your risk tolerance, your own analysis, everything else in life is individual and so look, how I would answer the question is you should be … I am much more defensive and hedged now than I was three months ago or at any time in the last 10 years and so it’s the measure of the risk/reward scenario in front of me and I’m still net long and I would go net short. I think about it a lot right now but if I got out right as things were about to crash, I would probably get net short or at least buy a lot more puts or I don’t know, something different but I’m still riding most of our longs, Zoom, DocuSign, Apple, Google, Facebook, Tesla. We’ve got some things that have been on fire and that’s fine. Let them ride, trim a little. Try to have your cake and eat it too.
Subscriber:
Okay, thanks, Cody.
Subsriber:
Cody, thought you might find this interesting. As you know, I work for Amazon, specifically Amazon Air, which is growing like crazy but that’s another story. About 18 months ago, we transitioned from Microsoft/Skype for internal messaging to a proprietary messaging system called Chime, which is a zillion times better than Skype but apparently, not as good as Slack. I have never used Slack. Well, Amazon, I think you guys probably saw this too, just announced that we will start using Slack across the company for messaging, integrating it with Chime to help improve our messaging functionality. This actually surprises me because we, Amazon, typically prefer to develop our own software solutions, so buying into the Slack movement is a huge signal of critical mass at a tipping point for Slack and how far ahead of the competition they really are. Slack is winning. Glad I started to buy Slack in the low 20s when you suggested it and see this as a good signal to possibly buy more. Amazon internal announcement is attached below for reference.
Cody:
That’s a good analysis. That’s good. I mean I saw the news about Amazon doing Slack. I was like ah, that’s great, but he’s right. Amazon’s a company that takes pride in developing their own software and Slack’s done it. Interesting.
Cody:
“President Cody,” Gene Munster was on yesterday saying that Zillow was a revolutionary company.
Cody:
Love me some Gene. He’s a good buddy of mine. He told me actually once when we met up at a conference somewhere that I was the first person to put him on TV. I used to put him on anytime because I really enjoyed Gene’s analysis. As a matter of fact, Gene and I were emailing each other. He emailed me when Tesla hit like 200 and he knew I had started buying it. He was like, “You still believe in this thing? Because I do.” I could hear the shakiness in his voice and I wrote back, yeah, I still believe in it too.
Cody:
I owned Zillow because it was a revolutionary company and it probably still is but I don’t like the flipping of the houses, the taking on the inventory of actually buying real estate that they have to improve and then list and then get sold and I … That’s just added too many layers of risk for me to feel like any horrible downturn, economic consumer cycle that Zillow has … That it would be low risk. I think they could end up bankrupt because it takes a lot of debt to do … It takes a lot of cash to buy the houses. You’ve got to tie the stuff up and that makes a cash flow question for the company, I think, longer term.
Subscriber:
This is more of a general, what’s going on. The way the government’s handling unemployment, normally the state gives unemployment insurance when you go on unemployment but for the time being, at least until August 1st, the federal government is adding another $600 per week to the normal unemployment and they’re talking about possibly extending that until January 1st and just from the news it looks like this may happen and when you add the numbers up, that means someone who makes under roughly $70,000 will actually be making more money on unemployment. And my concern is as companies start needing to bring people back and if this actually extends until January 1st, it’s going to be a real problem.
Cody:
I mean, I get you. I don’t think it is though. Are we talking about the banks or the people? Because it’s the banks that keep begging and depending upon ever more largesse and I’m always wondering when do banks go back to doing business? I thought banks were supposed to be just pipes, plumbing and facilitating the movement of money but oh, we’ve got to keep bailing them out. We’ve got to keep doing … They need more emergency programs. We’ve got to do more. Trillions of dollars worth and wait, and so you’re worried about a couple of people who are trying to feed their family and making sure that they can make their rent for a few extra months and …
Look, man, the system’s busted but if you’re going to fight it, if you’re going to worry about something, I would strongly encourage you to look at the order of magnitude of numbers and look at the order of magnitude of importance in the place of the economy and the trillions of dollars of largesse welfare corrupt programs that the federal reserve and the giant banks and the treasury department are scamming the American people with, looting … You want to talk about looting, the looting that has gone on in the last 60 days, in the last 10 years, in 2008, the looting that these bankers and corporations are doing to you and the people at home who are maybe going to get that $600 extra for a few extra months-
Subscriber:
I agree.
Cody:
It’s no problem. People at home are not going to go well, I might be able to keep a couple extra thousand dollars for a couple extra months, so I’m not going to go find a job. There are … They have 10,000-day views. You’re at home, you need a career. You need a job. You’re not going to try to game the system for an extra couple months. You’re going to go take care of your family. You’re going to go put some money on the table.
Subscriber:
Yeah, I-
Cody:
That is part of some propaganda that you’re worried about right there.
Subscriber:
Yeah, no. I hear what you’re saying. I mean the trillions of dollars that the government-
Cody:
And the bankers know it. Again, the bankers aren’t working. The bankers spend their lives scamming the system instead of lending and creating economy for us. So if you’re going to worry about the implications and ramifications of systems and welfare, you better fix the bank problem before you even look at one of the things that the republican conservatives or the liberal democrats want you to pretend matters.
Subscriber:
Yeah, I guess … More of my concern was that … I hear you on that because I’m right with you on that. I guess my concern was that unless it’s just propaganda, you hear things like they’re trying to get … Costco’s trying to hire 10,000 people and then you … People are saying, oh, they’re not going to be able to hire them because people are making more-
Cody:
That’s not a scoop, that’s propaganda, man. I honestly … That sounds just silly to me. That is someone who’s fighting against taking care of the people and wanting you not to look at the real money moving where it’s moving.
Subscriber:
Yeah, I’m guessing that that’s small potatoes when you’re looking at everything.
Cody:
And even just … And I’m talking not just the dollar amount but the incentives themselves. To think that masses of people will choose to stay home a few extra months because they get $600 extra is silly.
Subscriber:
Yeah.
Cody:
The fact that bankers choose to game the system and get more welfare and create more emergency programs and do all the scams they do is real and matters every day and will for years.
Subscriber:
Yeah, very … I didn’t know if that would affect things-
Cody:
I think it’s a MacGuffin. They’ve got you looking at something when the real stuff’s about to happen over here.
Subscriber:
Yeah, I guess in the scheme of things, the money’s being thrown around at these banks and so on are …
Cody:
Incentives. Again, the incentives.
Subscriber:
I’m in retail and that little stuff kind of [inaudible 00:51:50] but yeah, in the big picture, I hear what you’re saying. Yeah, thank you.
Subscriber:
Bitcoin briefly surpassed 10,000 this week and I think part of it was China and well, they say it was part of China and part of, I guess, Jamie Dillon from Chase is saying one thing but doing another and he might … I don’t know what your thoughts are on Chase, if you know much about what Chase is doing with cryptocurrency?
Cody:
Yeah, they’re pretending they’re doing something with cryptocurrency but not doing anything and look, all the banks have a crypto bitcoin department. None of them are taking it too seriously but they all got their toes in it and Jamie Dimon’s been poo pooing … I’m going to call him Jamie Dillon from now on, I like that name much better. Jamie Dillon has been poo pooing and explaining why bitcoin won’t work for, I guess, just about the time he got … Just about as soon as he had the opportunity to tell you to no longer defend himself against the accusations of fraud at JP Morgan under his stewardship from 2002 to 2008 at the height of the financial crisis when he pretended he didn’t need to get bailed out and … Yeah, Jamie Dimon could easily be in prison if a different regime, different republican/democrat … If the republican/democrat regime itself didn’t protect bankers at all cost.
So, this is a person that I put just about negative value into his opinion and there’s not many people on the planet that I am more angry or disappointed in than that guy. So who cares what he says, my answer and honestly, I don’t think bitcoin moves on anything he would ever say either because I think most bitcoin enthusiasts couldn’t care less what the world’s largest central bank funded bank thinks. Central bank, see I’m saying that JP Morgan, the bank, is funded by the federal reserve in case I wasn’t clear on that.
Bitcoin, I own bitcoin in the hedge fund and bit coin futures and I own it personally and I would rather buy than sell bitcoin at this moment. Bitcoin is probably better positioned than gold right now just because it fits so much better into the Kurzweil real time change that we live in where money moves instantly and fiat currencies … If there ever were a time to worry about fiat currencies, it’s over the next year to five years and then maybe they’ll ebb for a while. If it doesn’t crack now, you’ll probably have a few decades or a decade of kicking the balls up in the air but bitcoin, bitcoin, bitcoin, it is definitely something I think you want to have in the portfolio for the longterm.
Last question. I will give one last question unless your name is David or Joe or Brian or Barry because you guys each asked two. And if nobody else is going to ask then I’m just shutting her down.
Subscriber:
You’re looking at interest rates going up and with the federal debt going through the roof, five years from now, 10 years from now, how are they going to pay for this? Is it even possible?
Cody:
That’s when you hear me talk about the fragility of the system being here. For my entire investment career, I have been cognizant and worried about the system itself and inflation and interest rates and how because we are such a socialist … Because the republicans and the democrats have made our country so socialist, so centrally controlled because they continue to give more power to the president, because they continue to give more power to the central bank, because they continue to give more power and take more money out of the system and run it through their coppers at some point they suck more out. It gets corrupted bigger and worse all the time. What was the question again? Joe, what was the question again?
It will break. It will break at some point. I never thought it would be near term. You’ve seen me mostly bullish. You’ve seen me for the last 10 years be outright bullish, riding stocks, loving these things. In 2008, I was … 2007, I closed my hedge fund because I was worried that the system might be breaking because of the financial real estate crisis that was hitting. It’s a different scenario now where it’s not there’s this one thing that looks like it could break the system but it’s a confluence of all of these things. You’re hitting on it, higher interest rates, borrowing more than ever. The system was shutdown, the economy was shutdown, we got a pandemic. It’s not over. We don’t have any cure. We don’t have any treatments. We’ve got people protesting. We’ve got the streets burning. Retail shops can’t open back up. Small businesses have shut down. Unemployment is higher than it’s ever been in the history of keeping records on it. Like these are tangible crises that each and every one could be a breaker of the system we live in. Together, they make me more worried than I’ve ever been.
I still think it’s a small chance that the system breaks any time soon. I’d be net short or I’d be figuring out bitcoin plays or something if I truly thought the system was about to break. I don’t know what you would do if you truly thought the system was going to break because I’m not really sure your dollar’s going to be worth anything then, so you can’t really be in cash. I’m not even sure the other side of your trades are even going to be in business, so can you even … Do you really want to own any options? Like are your stock certificates worth something if the system … Yes, the stock certificates … Equity will still be worth something but there’s the risk and I’ve never felt like that in my lifetime that that was really near term possible. Maybe in 2008, slightly but not like there is that risk today.
And so because I don’t think, even with that added risk, I still really don’t think the system is about to break this year or next or in the next five years. I don’t. I think it’s going to make it. But that, number one, if it’s a 1 in 20 or 1 in 50 or 1 in 100 chance, that’s more than I thought it was. It’s 10 times more likely today than it was a year ago. The system breaking is 10 times more likely today than it was a year ago in my mind. Still is a very unlikely scenario but it’s more likely than it used to be. It’s less unlikely than it used to be. So, it’s why I’m more defensive, why I’m more cautious. It’s why I’m not net short but I am more cautious. If interest rates go to 5%, the system’s busted. They’ll have to figure out something else. How do we provide healthcare services? How do we provide food? How do we provide schools if interest rates are at 6%?
Subscriber:
Can’t the fed just continue to keep buying debt in order to be able to keep interest rates down over prolonged periods?
Cody:
That’s the playbook that they’re gambling our entire system on, and probably but no. I mean you know it makes no sense for the same entity that’s issuing the debt to buy the debt. The government is issuing the debt and the government is buying the debt, so it isn’t real. The system itself doesn’t allow that to last long. Otherwise, everybody would just pretend that they’re borrowing money and printing money and not … If it worked, everybody would do it. It doesn’t work. It will break the system if we do this too long.
Subscriber:
At a minimum, you’ll get inflation, doubling the prices.
Cody:
No, we don’t know that. At a minimum, the unintended consequences are going to dole out a lot of pain to a lot of people. I don’t know that it would be inflationary. It could be deflationary. I don’t know that … I do know that the oppressed and poor … Let’s get back to the beginning of this thing before we wrap up, I do know that the oppressed and poor in this country will suffer more than the wealthy and the corporations will no matter what happens when the system starts breaking, if and when it ever does. And I want to have a system in place that’s better than this and we can do it.
I just realized there’s people asking in the chatroom. SolarEdge is trending. Yeah, SolarEdge has gone from 14 to 150 since we bought it. Still own it. I’d trim some if you haven’t, but I wouldn’t sell it. In addition to Information Rules, what other books would you recommend for the revolutionary investment approach? I’m reading Trotsky right now. Yeah, I’ve been studying the Russian revolution, and I find this stuff applicable. It’s communism, his writing, so a really rather pure communist philosophy and it’s applicable to our life. It’s applicable to the stock market. Like it’s hard to explain. I haven’t got my head quite wrapped around how to use the lessons and parallels that I’m getting but it’s interesting to read most any well-known political treaties and try to find the parallels to today.
Subscriber:
Cody, you’ve been saying a lot of cash, what do you put in your cash? Under your mattress or whatever? I don’t actually have any cash with me. Where do you put your cash? In the market fund or cash …
Cody:
I prefer outright cash if you’re broke or designated as such, get outright cash. Don’t even leave it in a money market. But yeah, leave it at your brokerage account in the cash place. What do you think of Ripple as a bitcoin alternative? I own a tiny bit of Ripple. No, though. Bitcoin, man, it’s the one. I don’t know anybody in Venezuela who’s ever thought about buying a Ripple and I know every Venezuelan I know has thought about buying a bitcoin if they haven’t already.
All right, guys. That’s going to be a wrap. Thank you, thank you. Peace and love.
