Here’s the transcript from this week’s Live Q&A Chat.
Q. Can you take a stab at gauging President Trump’s action against TikTok as it would impact Chinese ETFs like CHIK, CHIQ, OCFT, EWH in the medium term? These have been good investments this year, right up until this morning. Do you think the President’s action is the start of a long-term fall in these ETFs? Or is this just a small bump in the road?
A. There are plenty of reasons to be worried about Chinese ETFs, including the fact that you’re investing in a communist regime. But while Trump’s socialist instincts of making the government ever bigger and more involved in our lives repeatedly since taking office with his socialist tax reforms and endless whining for more socialism from the Federal Reserve and his ramping up ever more welfare for giant farm-related corporations and the wealthiest ranchers in the country and his socialist giving/lending trillions to giant corporations like Kodak and Moderna….well, in that context, his direct meddling in the Tik Tok/Microsoft/Facebook drama doesn’t seem all that important.
Q. Hi Cody, would appreciate your opinion on this article? Thanks. “The Looming Bank Collapse The U.S. financial system could be on the cusp of calamity. This time, we might not be able to save it.“
A. Eh, the bank regulatory agencies and the Federal Reserve and Frank Dodd Trump Pelosi Biden Obama Bush are all owned by the big banks and will always do what their bank masters order them to do. The socialist banks that control our government and our currency are always causing crisis and will do so again and they’ll get away it again too.
Q. Can you recommend few best books for investment or you can give me some suggestions? Thanks a lot! (I just finished to read your book: “ Everything you need know about investment’’, Great book.)
A. Thanks for the kind words. I’d suggest Information Rules, The Intelligent Investor, The Alchemy of Finance.
Q. For diversification purposes, I’m interested in finding investments ideas in areas that are divorced from the U.S. markets as we all know them to be in the midst of a bubble. Have you noticed anything that may have been interesting from a risk/reward proposition that doesn’t necessarily fit into the category of a high-growth “Revolutionary” name?
A. How about WBA, Walgreens Boots Alliance? Cheap, stock chart is horrible, dividend yield is nearly 5% and its Boots division is based in England.
Q. In a recent chat you talked about buying puts on vaccine makers across the board. Can you elaborate on this strategy, target stocks, and timing? Do you think there will be multiple vaccines or just one?
A. I don’t know if buying puts across the board on all the vaccine makers is quite a strategy or just a thought I had. I expect that in the rush to get a vaccine out there, Russia, China, the US and Europe will each have at least one so-called vaccine by next summer. I expect some of the current front runners like fail and that buying puts dated out to early next year at strike prices 10-30% out of the money would probably pay off. The premium on the puts is expensive though and there’s no guarantee that I’ll be right about this thought.
Q. @Cody: how will this bubble market affect Bitcoin? I recently opened a tiny position, but want to scale more into it when the time is right.
A. As I’ve been saying since 2013 when I first started buying Bitcoin, Bitcoin’s going to benefit from the endless move to devalue all fiat currencies by the governments that issue fiat currencies. Short-term, I have no idea what bitcoin is going to do now that it’s popped like I’d been expecting a couple months ago. Longer-term, bitcoin is likely to replace the dollar as the reserve currency of the world in the next two or three decades.
Q. I’d like to get your thoughts on hedging? I’ve stayed away from options forever and lately I’ve been hedging but keep adding to losing hedges and everything evaporates. I’ve been tranche buying hedges in a way, which doesn’t work (at least not for me) and these positions have accumulated too many losses. Raising cash is much easier and safer. After this round of hedges disappear, options are done for me. But how do you approach hedging? A percentage of your position or portfolio?
A. No easy answers. So often when we give up on buying puts — that’s about the time when puts kick in and make money. I’m also losing money on our hedges and our puts but you are correct that I keep the put hedges to a small percentage of the portfolio for now. It’s possible that I turn outright bearish and look to get more aggressive on buying puts and shorting some more stocks of more size in coming weeks if the markets keep ripping higher and the Covid Crisis were to heat back up in the US.
Q. Do you also believe that Stagflation is coming? Besides, the names in portfolio, are you looking to add more commodities like rare earths? Thanks & have a great weekend!
A. I don’t know if inflation itself is going to ramp up in the way it used in the 1970s when the US last stagflated. We could see prices collapse in coming months if the Coronavirus Crisis doesn’t get under control sometime next year. I’m not going to buy rare earths, but I am looking at some rare earth stocks and getting my head wrapped around the industry.
Q. Wondering what you think of bonds (Total Bond Fund) in this environment. It is something I need to better understand. In this environment, I have little trust of the markets and “market norms”. I don’t know what to believe or expect anymore. BTW, Lifetime Subscriber now. Thanks for everything you offer. It’s a lot more than just trading.
A. Thanks for being a lifetimer and for the kind words. Bond funds seem like a bad idea to me here, as the upside potential and the small yields make the risk/reward skewed against us in bonds in 2020. Sorry, I’d rather own our stocks than bonds even now.
Q. Cody – I am curious your thoughts on shifting a good portion of ones investments to an ETF that is an inverse to the S&P 500 like SH or SDS. It seems like buying that right now and sitting on it for several months would eventually provide a solid return.
A. I’m short some SPY and long some SPY puts, but I’m using them as hedges, not necessarily because I think we can get some good returns by betting against the S&P 500. That said, feet to fire, if I had to buy or sell the SPY and close the position in three months, I’d rather be short it.
Q. Hey Cody, Do you see interest rates rebounding much in the next year or two? I didn’t see TLT on the latest positions, do you still see it as a good short? Thanks.
A. I’m not so sure that interest rates will rise any time soon. But when the rate on the 20-30 year Treasuries go above 1%, it could really go higher after that. Could be years before that though. I’m still short a tiny bit of TLT, but it’s been a bad trade and a bad hedge so far.
Q. Cody, covering some FSLY here?
A. Yes, maybe just a little bit, trim some of those FSLY puts to lock in some gains. Leaving most of them though.
Q. TGIF! Have you looked at FSLY as 5G play? It is getting hit on Tik Tok right now. What are your thoughts on this US / China conflict affecting our markets in the near future?
A. Yes, I’ve looked at it but I didn’t like what I found. The gross margins are iffy here, the stock is trading at 25x next year’s sales estimates and I sent out Trade Alert mentioning that I was buying puts on FSLY last week.
Q. Cody…QCOM this seems to be running due to “settlement” income from the past. Does this dry up at some point, and if so, what would normalized earnings look like without this “additional revenue”? Thanks Cody.
A. I think the stock is running for more than just the settlement they did with Huawei for a billion plus bucks. The 5G Revolution is likely going to be huge for QCOM and the stock is cheap here. Normalized earnings two years from now could be about $8-10 per share.
Q. For chat today: You’ve said recently that CSCO is one name that you like here. What are your thoughts going into earnings due next week?
A. CSCO seems to always disappoint me over the years when I’ve tried to game its earnings reports. I think CSCO could talk up some market share gains and some momentum in the underlying core business of routers, but who knows what the stock will do the next day. I’ll nibble more if it gets hit hard, most likely and I’ll mostly sit tight if it pops after the report.
Q. Thoughts on Barry Diller’s war chest and IAC?
A. I’m not a Barry Diller fan and that alone has kept me from ever investing in IACI.
Q. SPCE – I’d like to build a larger position. Is this a good level?
A. Nothing wrong with nibbling a little bit of SPCE while its in a down trend if you believe in the company for the long-term.
Q. DVAX is in red zone from a while. Do you still this it is good long term position? What are your thoughts on Pfizer (PFE), Moderna (MRNA) and Novavax (NVAX).
A. We’re still up nearly double on our DVAX and I’m sitting tight with my remaining position for now. PFE seems ok risk/reward here, but I’d rather own puts on MRNA and NVAX than buy them.
Q. Cody, your thoughts on FISV? There’s huge vol (14M) this morning on the March 105 call, but it’s only $2+ above the current price, and it’s 8 months out. When they go that far out for so little price improvement, does that mean the conviction is not that strong? An extremely slow grind higher at best? Thank you.
A. FISV has no topline growth and is trading at 20x next year’s earnings estimates. I have no real opinion on it as long or a short. As for the question about the why somebody bought the options they bought — we have no idea what motivation they might have for that. Maybe the person who bought those calls is short millions of shares of FISV and is just trying to hedge that position on the cheap or something.
Q. Good morning (afternoon), Cody. Wayfair, the online furniture/home furnishings company, had a huge quarter and a jump today (and this year) reflecting that. They feel they’ll hold on to this good fortune, and these customers, for future buys, but others think as soon as things open up further and the flow goes back to bricks-and-mortar, things will soften. Is it a good time to short W?
A. I’d rather be short than long W at $317, up from $25 a share at the March lows. With gross margins under 30% and with a revenue growth rate that’s likely to slow to under 20% next year from 50% this year, I see a lot of potential downside in this name. But it’s a good company and that makes it hard to short, IMHO.
Q. This week I have seen a 5G installation first hand at a large sports venue here in Texas. They are using a lot of Commscope products. Have you had a chance to look at COMM and if so how do you feel about them compared with other 5G plays?
A. I have looked at COMM and I like the stock here as a 5G play, but I’ve not pulled the trigger yet because I’m still researching Commscope’s models here.
Q. I read that more states are looking into expanding legalization of cannabis to make up for shortfall in revenue due to Covid-19. Should we look into these cannabis stocks?
A. We should look into them, but I haven’t found one I want to buy yet.
Q. Interested to hear your thoughts on Zillow (Z)?
A. I don’t like the risks that Zillow is taking on by buying and selling houses, but so far, during a bull market in real estate and with mortgage rates hitting all-time lows in the US, it’s been working for Z.
Q. Cody could you give us the where I’d look to add on your picks sir.
A. Most of the stocks are a long ways from where I’d buy more, but yes, I’ll try to do that analysis next week for you guys.
Q. FVAC And MP Materials **** Merger: Speculative Play On The EV Revolution And Rare Earth Metals.
A. Yes, I’ve been working on this name, thank you.
Q. Are AMD and SEDG too expensive to start positions in?
A. As usual, my answer is that if you don’t own them yet, you might want to nibble a partial position to get started and then give yourself some room to add more later.
Q. A TWC LIFETIME SUBSCRIBER, I AM ! Cody, This has been a great investment ! I do not consider cancelling it ..I imagine I cannot and am glad I cannot, the returns on your guidance continue to be STELLAR. Thank you ! I want to the cleanse the part of me that traded my 3,000 shares of Amazon in 1998, traded away shares of Apple that Were bought at 11 dollars, shares of Facebook at 22, Solar edge (at 11 dollars due to listening to Robert Marcin …many years ago and asking you when you gonna look at Solar Edge Cody ?) Tesla at 40 ! Oh you would say I do not want to invest in a company dependent on government subsidies ! Watch out ! I want in your world of stocks what you Plan to hold for life …or 10,000 days …and all the fluctuations in between you understand to be just chatter in the moment ! Not important At all ! I want to purge my investing of trading …and buy and hold for the long ride ! If I had held on to my amazon shares…and just forgot about them til today…I would have a gain of 9,621,000 ! My initial investment was 45,000 ! I want to blot out the daily chatter . .how do I manage to do this in my investing ? How do you sort out the short term information for the New Mexico Horizon ?
A. Oh man no easy answers! Investing in the greatest most Revolutionary companies on the planet and mostly holding onto those shares for years to come is what I’m all about though.
Q. Cody, What should we do with SPCE? Will it go bankrupt?
A. It certainly could go bankrupt in a few years if it fails to deliver on its promises, but they have a lot of cash and I’m holding my remaining shares steady.
Q. Do you believe bitcoin/crypto currency will follow the cycles of the stock market or will it be different? If we see the stock market pull back dramatically and crash, will Bitcoin/crypto follow it?
A. No, I don’t think bitcoin will be correlated with the stock market over the next two years.
Q. If someone were to buy say, $100,000 worth of Bitcoin, what service/wallet/system would you recommend using? I have a CoinBase wallet with $3000, but I’m not sure I’d put $100k in it.
A. Good question and I am not comfortable vouching for any of the bitcoin wallets. Maybe check out the Square Cash app.
Q. Hi Cody, if you were up large, over a long term (say since 2011), on a specific position that is a very large portion of your porfolio (say 90% of non-cash) and that position just had a 15% pop (lets say it’s Apple, cause it is) do you think some hedging would be good? buy some puts maybe? I don’t want to sell any shares really, Thanks!
A. I can’t really help too much, because I’d suggest NEVER having 90% of your stock market exposure in one stock, not even AAPL. Yes, I’d look to buy a few puts dated out to December, maybe 10% out of the money to hedge a position that large.
Q. Cody, Lakers does not look good in “The Bubble.” Which team do you think will win it this year?
A. I haven’t watched game since they returned…no idea, really. Who’s the biggest underdog that made the bubble? I’d take them. Clippers will probably win it all though.
