Here’s the transcript from yesterday’s Live Q&A Chat over zoom. The markets have given back all of yesterday’s brief upside. Remember how I’ve been saying “This is a ‘No BS Market’.” Well, the Fed tried to BS everybody yesterday with their silly 50 bps raise yesterday. Rates are still way below where they should be if they are serious about fighting inflation. They needed to shock the system yesterday with a 75bps raise and a promise of another 75bps raise. Instead they think they could play their same ol’ jawboning game. No BS allowed on the markets right now. I’m not doing much of anything in the hedge fund or the personal account today. Patience and caution remain front and center with a little increasing bullishness as prices get lower and panic will eventually peak.
You can also click here to watch the video.
Cody:
Welcome everyone to a rare but requested Zoom version of Trading With Cody Q&A. We used to do these about once every couple of months, but I did a poll of all of our users. If you guys have been subscribers for a while, you probably remember maybe six months or a year ago, I sent out a poll asking everyone their favorite features. And there were a few people that picked the live Zoom version of the Q&A chat, but it was not overwhelmingly positive, everybody’s favorite or something.
Cody:
So anyway, I’ve been doing the text, but then I got an email saying, “Hey, can we do this again this week?” So yes. And what a day to do it? Well, tech markets are extremely ugly. ARC down another 4%. And what’s our 52-week low? 45.89. I sent out that note yesterday about what I was calling… I didn’t mean disparagingly, but I was just trying to be sort of accurate, “The wannabe revolution investors” and the people who, in the last… And I was talking specifically about large fund managers, hedge fund managers and or Cathy who had really gotten into our philosophy of investing in the last year or two to the utmost. And it got very crowded with retail and funds all thinking they should be revolution investors. Suddenly, everyone was a revolution investor. And you guys saw me talk about it over and over, that it was crowded. I tried to do the great reset, clear out as much of the portfolio as I thought was necessary. I should have done more. We’re going to have to take some losses on some of our more speculative names that have been demolished at some point out of this.
Cody:
So what I was going to say was, Tiger Capital came out yesterday, a hundred billion dollar hedge fund. They’re down 50% on the year before today. And it’s tough out there guys. I know some of your portfolios are down like that probably. Maybe not quite that much, but perhaps, depending on how aggressive you’ve been and on which names you were most heavily concentrated and it’s been an awful market. And it’s what I was warning us about and why I wanted us to be defensive. Here we are now. I think we’re getting closer to there being some real opportunities being developed and I’m getting incrementally more bullish, let’s call it bullisher, but it’s a hard business. I mean, when a hundred billion dollar legendary hedge fund manager like Tiger is down 50% year to date, dude, this is a tough business. And that’s why I’ve always said that. It’s not easy.
This isn’t supposed to be fun. How many times did I talk about that last year? This is not supposed to be fun. It’s a hard, hard job. This is your money. And we got to remain cautious until we can get through this, but there are going to be opportunities.
Cody:
Space stocks, believe it or not, yes, there are going to be hundred baggers in space. After the .com crash, you could have gone through and found Priceline or Amazon or some of these others at a hundred or even 500 baggers out of there. And that is the setup that is developing now in probably some AI, probably some space.
Cody:
I always go back and look at cannabis, but as I’ve mentioned for years now, I don’t see the revolution part of cannabis. It’s a new commercial, consumer market, but there’s… I like revolutionary things that change the world we live in and that’s what space is. So space has been ugly, and like I said, we’re probably going to have to take, not probably, we are going to have to take some losses and we can always get back into some of those space names that are down. But I am going to have to capitulate at some point on one or two of them, not Rocket Lab, but as I’ve been saying Rocket Lab’s also still very highly valued, probably overly valued even now. And so, a little more patience. I did have an order filled in the hedge fund to pick up a little of Rocket Lab this morning at $6.80. But it’s become a smaller position, not smaller, but a medium sized position as it’s fallen and I haven’t been buying much. I’ve been letting it do this. But some of the other space names probably going to take some losses. Let’s go into the Q&A.
Speaker:
Can I ask more of just a macro question? Do you think there is some big clearing event in the next, I don’t know, one, two, three months that gives analyst investors more comfort here related to getting back to some sort of multiple expansion? And I’m not talking peak multiple where peak multiples were, but whether it’s getting comfort around where the fed is going to take rates to inflation rolling over broadly or in certain commodities, whether it’s food related or housing materials related? Does the Russia, Ukraine situation have to end? What’s the one big clearing event that has to happen for the market to put this bottom in and start climbing higher? And I know it’s a lot — but I want to think about when to throw money back into the market.
Cody:
Yeah. Let me flip it on its head, the whole premise of your question on its head a little bit. If the best time to sell was when rates were absolutely zero, the federal government was pumping every dollar they could into the system, the Republican Democrat regime had run to their logical end game of cutting rates for giant corporations and creating subsidies and protections for giant corporations, and not enforcing antitrust laws for corporations, and spending trillions of dollars bombing children in the middle east, and creating all kinds of additional fiscal spending through violence and war mongering, and creating lots of money for the shareholders of Lockheed Martin and Boeing and all of the companies that create weapons, if that was the best time to sell, when it was all as good as you could possibly get for it, the economy and corporations and investors, if the best time to sell was when every retail investor, who was going to find crypto had found crypto and made a bunch of money real quickly for a few days or months, because they were all geniuses, if those are the times to sell, the time to buy is becoming clearer now because of all of the horrible things you just listed.
Cody:
None of them have to clear. They all will or they don’t and really things then are horror. Yeah. Then things get really bad. I mean, society gets bad, violence in our own domestic country gets bad. It’s worse, I should say. Because certainly in Albuquerque it’s bad on a daily basis, the violence. In New York, in Chicago, it’s a bit bad. In rural high schools, it gets shot up. It’s bad. There’s violence already and it’ll get worse if inflation runs at 10, 20% for years. If this partisan anger at each other and this, “Let’s find issues that none of us really care about that we can get really angry about because we watched some cable news and red Twitter.” Yes. That stuff can get much worse, but frankly it’s bad right now.
Cody:
And the one thing, the overwriting principle that I do think is true and hopefully the Republican Democrat regime has not pushed us too far into debt and violence and global resentment at our country that this is over, but we’re the cleanest shirt. Things work out for the US. Things do work out here, the economy balances. So the best time to buy is getting here. Right now. You need two more catastrophic geopolitical headlines and you need another 10 or 20, 30% lower in a bunch of these stocks, 40, 50% lower in some of the worst ones, and then you’re going to be like, “Why would you ever buy a stock?” At that moment is when you buy your stocks. You’re nodding your head. Right. I mean, isn’t that right? They clear. But I don’t know which one’s going to clear. We don’t need any of them to clear for the market to be a buy. You need it to finish this.
Cheryl:
How about Putin when he throws a nuclear weapon somewhere?
Cody:
Look, that’s a market economy, life altering, game changing factor. Nuclear weapons, they’re not factored in. The worst case scenario is nuclear weapons. If the nuclear weapons come out, the market’s down 20, 30% a straight line, and I don’t know if I’d want to buy that. This doesn’t seem fun. That’s not the right word. That doesn’t seem like a risk, reward opportunity. There’s an old saying that you buy when there’s blood in the streets, of course. It’s supposedly from the Rothchilds. The saying is not, “Buy when there’s radioactivity falling from the sky.”
Speaker 9:
With these huge swings, though, in the market from day, I was going to say week-to-week, some of it’s day-to-day, 500,000 point swings, some of it makes no sense, but why don’t we just get this? I would rather see, and I don’t know why it hasn’t happened, to get this big whoosh down and just wash out all these we can investors so we can build-
Cody:
That’s why. You just said it. I want the same thing. We all want it. If you’ve been defensive at all, you’re sitting here right now being like, “Let’s just get the whoosh. Let’s get this whoosh. Let’s get the crash. Can we get her done? Come on, man.” Like ARC at 40, ARC down another 20%. We’re all sitting there wanting [inaudible 00:34:13] Tesla to whoosh down to $700. You want that easy, I mean, it won’t be easy when it happens, but you’re sitting there and you’re like, “I want that opportunity to buy and get that crash over with.” And both your questions have been centered around that sort of end of the cycle here, and that’s why it’s not happening. I think in the grand scheme of things… I mentioned it in that writeup yesterday, that the most likely scenario is the market doesn’t… You don’t get out of the market in a panic, you get out of the market in a grind. And if you can just avoid the grind down being down 50 or 60 or in ARC’s case, 75% at this point, you’ve got the opportunity to build wealth, but you’ve got to avoid that and it doesn’t… The point being that the reason that we don’t get the whoosh down is because everybody wants it, ironically. It’s too easy.
Speaker:
All right. Thank you.
Cody:
Next question. I bet it’s from Doug [inaudible 00:35:33]. Anybody else want to take the other side of that bet?
Doug:
I got one for you.
Cody:
Called it! I could see the future. I’m a fortune teller. Totally nailed it. Okay. That might be reflexivity in its real place. The reason I was right was because I said it out loud and Doug was nice enough to be like, “I’m going to ask that man a question.” It better not be about the small-cap index. Oh, he’s like, “Crap. Now I don’t know what to ask.”
Doug:
No, no, no. Believe me. I timed it and got out pretty much at all time highs and I’ve been buying Rocket Lab as all time low, but okay. Now for a tax sheltering, I need to contribute my max 19,500 a year. Okay. That’s no problem. Now, do I put it as cash or is it now the time… Because it’s over time, should I start buying back into small caps or should I go with the big caps? Their names have been beaten up already so hard. Again, we’re all [inaudible 00:36:46] generator. Okay. Again, we’re all waiting for the bottom to happen before we put money in. We’re all scared of losing money. I mean, [inaudible 00:36:56].
Cody:
Doug, number one, congratulations on actually timing anything, because that’s very hard and I did plead with you to get out of some of that stuff along the way. I’m glad you did. And now you’ve got some flexibility. That’s sort of what I’m talking about with… The hardest part is making sure you don’t lose 50 or 70% or in the small-cap index, what’s it now? Probably 30% from its recent high in a straight line. So let me just pull it up actually. 2458. Now it’s 1,800, that’s 700 points. So 25% call it. Look-
Doug:
Which it hasn’t been getting at as much as the otherFeat stuff we’ve been-
Cody:
To be honest, I’m sure the small-caps still… I mean, of course I’m always honest with you. I hate when I… My first boss on Wall Street would literally send you home for using the term to be honest. “Cody, what? Have you been lying the rest of the time?” Look, I’m still short the IWM in the hedge fund, I covered a bunch of it the other day and switched over to puts, but it’s sort of a constant right now to be short some indexes in the hedge fund. And that one’s part of it. I feel like looking at the chart, what you just said is probably… It looks vulnerable to me. I would think it needs to catch up to the stocks that are down 50, 60, 70%. It’s the energy and the bank names in there that are holding it up.
Cody:
And so, what’s nice about the Russell 2000 or any indexes, not any index, but most indexes are going to give you some diversification. That’s 2,000 stocks. So that being said, that also capture upside. When you buy indices, the most you’re going to do is average. And I had a mentor years ago who would tell me that it’s okay to short indices, but my job is to find companies that can go up 10 or a hundred or a thousand times, not buy some indexes and try to tie the markets better than the next guy over. And so, I do. I spend my time in my hedges in finding unique companies. I don’t have much else help for you on how to approach it from there.
Doug:
Thank you. You got me out at the top.
Cody:
What’s that?
Doug:
I said, you got me out at the top and that’s how I do it. When you’re taking off, I’m going into cash and when you’re like, “Okay. I’m going to add to the short, I take away, but when you’re positive and you’re going to go cover some of your shortness, I dump in.” And that’s how I’ve been playing it for years. And that’s why I keep asking, “Hey. What your feel? How do you feel about the markets right now?”
Cody:
Doug, I will tell, feel for a market can come and go, man. That is part of the problem.
Doug:
Hey. Hey. Yeah. No problem. Also, one more thing before I let you go. People were saying now, “Buy Tesla or Amazon.” For someone to get in now at these levels that it already split, that thing can go way way a lot lower.
Cody:
Whoa. Whoa. Whoa. Whoa. Whoa. Just stop. Just stop. The splits are irrelevant. Always have been, always will. Don’t even put the split in here. And second of all, I banned… This is the person formerly known as that guy. We’re not mentioning that guy anymore. You’re not allowed to even talk about it. I already set those rules down. Next question. You’re banned. I’m muting Doug. Mute. Mute.
Speaker:
So you said you want to take some of our losses? Do you know what ones those will be yet?
Cody:
I’ll tell you when I do it. I’d sort of like to get through this quarter, these reports and sort of siphon out companies that are clearly just not even doing it and companies like that one or two that probably we should hold onto. And one of the things that just probably needs… I probably shouldn’t have done this last year even, take some… Sometimes you just got to sell, take the loss and then you can come back in a month or two and revisit it. And I will leave all those stocks that we sell on my screen. Because I still am very much a big believer in the space revolution. We just getting through, clearly, this anti-speculative kind of [inaudible 00:43:02] that… We had a bobble guys and we’re now just trying to get done with the crash.
Jeff:
Okay. You were talking about Rocket Lab. It’s down quite a bit today. You are still very confident in the future of Rocket Lab. And second question is, do you think it could go down quite a bit more?
Cody:
Yes and yes. Right? I mean, that’s sort of the point I’ve been trying to make, is that Rocket Lab, outside of SpaceX and Blue Origin, but SpaceX is the crème de la crème, it’s the best by far in the space industry. Beneath that Blue Origin, beneath that is Rocket Lab. And then the rest are down there somewhere fighting. It makes no sense to me that Lockheed Martin or Boeing doesn’t come in here and throw some chunk change and pick this thing up for 20 bucks a share or something at this point, if nothing else. But I hope that they don’t sell because I do think that Rocket Lab is going to be able to compete with SpaceX and Blue Origin, but mainly SpaceX, and expand margins, get revenues going, be a vertically integrated space company that builds and delivers and shoots satellites. Up into space I mean, not shoots them down.
Cody:
So yes, but the market cap at this moment, $3.14 billion, the company’s going to do tens of millions of dollars in revenue this year, jumping to 200 million next year, 500 million the next year. I mean, these are huge growth numbers. But 500 million in two years or whatever it is, I don’t have it open in front of me, but hundreds of millions of dollars in two years means it’s still trading at six times sales in two years out numbers. So it’s still expensive and it could trade at three times two years out sales in this kind of a market. So be patient, but that’s not what I’m going to sell. That’s not what I’m going to sell. Peter Beck, the CEO, is I think brilliant and solid, and seems like he’s just making this thing happen unlike anyone else, except for a guy named Elon Musk. Yeah. I’m sticking with Rocket Lab.
Cheryl:
For Twitter, I’m wanting to know, why it’s at $48 when Elon made a bid for $54? Evidently nobody believes he’s really going to take it over.
Cody:
Well, that’s an arbitrage kind of thing that is always commonplace in the market. Did you see that Warren Buffett mentioned at the Berkshire Hathaway annual meeting on Saturday that they have been continually buying ATVI Activision. Well, Microsoft has a bid to buy Activision at, I don’t know, $91 a share, low 90s. The stock, let me pull it up, trading at $79. So there’s a 15% arbitrage opportunity. The reason that happens is because, you are correct, in both Activision’s and in Twitter’s case, the market is not 100, and rightly, not 100% convinced that the deals will go through. You have regulatory concerns, certainly with the Microsoft thing. I mean, it’s ridiculous that we pretend there’s antitrust regulation in this country when Amazon and Microsoft, and Google roll up companies every year, and then some cases to the tunes of 70, $80 billion worth of value that they’re writing these checks for to pick up these companies like in Activision’s case.
Cody:
So it is commonplace, correct, that the market does not 100% believe that Elon’s going to get Twitter. I’m not even sure they’re going to. And the problem in Twitter’s case, more than Activision… If Activision still doesn’t go through, it probably falls to 15, 20, 30% maybe, at most. But if the Twitter deal doesn’t get through at this point, I mean, with Elon having basically said that the CEO of Twitter isn’t going to be running the company, with him having disparaged the board as badly as he has, who wants to own Twitter without Elon? So that stock’s down 50% if the deal doesn’t happen. I mean, that thing’s back at 30, 25 maybe, and it’ll get demolished. So there is real risk in Twitter because it’s not a guarantee that Elon… I mean, that guy is brilliant, but he is also like what a cat is. Can’t think of the right word. He’s willy nilly. He’ll change his mind, do one thing, zig and zag, and then whoa, whoa, upside down, “No. Not doing that after all.”
Cheryl:
But there’s a big penalty if he doesn’t do that.
Cody:
Okay. Let’s put it in these terms, okay? Say you’re worth $1 million and you’re trying to buy this company and you’re like, “Hey. I have to guarantee $30,000 breakup fee if this doesn’t happen.” That’s the percentage that it is for him. On a million dollar net worth, it’s a $30,000 guarantee if he walks away.
Cheryl:
Yeah. Okay. Yeah.
Cody:
Can I mention one last thing of this? Elon sold his stock at the top when those… How does things work out like that for him? This is crazy. Those options were going to expire that he had to exercise last year, no matter what. At the end of the year he was going to have to exercise those options, and if the stock was at 500 at that moment, that’s where he would’ve sold them at, but those options expired at $1,200 a share, just the way the world, the universe, God, whatever, Elon, it all played out that way. And his tax rate was 35%, 30%. Who knows? If you’re a billionaire, you got so many loopholes and write offs etcetera, that… Let’s call it 30%. So 30% of $1,200 is $400, $800 a share is what he walks away with. What’s Tesla trading at right now? $880 a share!
Cody:
Are you kidding me? This is crazy. How does it work out like that for him? So again, he sold how many billions of dollars was it? Somebody tell me. 30 billion? Whatever it was. Tens of billions of dollars of stock that would’ve been one third less of that. The only reason he could even afford Twitter is because of the way those options worked out. It’s insane.
Cheryl:
Yeah. I’m surprised that it didn’t go down more when he bought all that. So there must have been a lot of people buying in.
Cody:
Yes. Well, at the time you recall that Tesla had just become part of the S&P 500 Index at some point earlier last year. And as one of the smartest hedge fund friends I have told me at the time, he was like, “I think Tesla’s going to $1,200 share.” He called it when it was at 900. And I said, “Why?” He goes, “It’s just so underrepresented in the average money manager’s portfolio. There’s so much money that has to come into that to catch up with the S&P 500.” And eventually it did. All right. Let’s-
Speaker 6:
Do you still own Twitter?
Cody:
Not in the hedge fund. In my personal account, yes. Yes. In my personal account. I bought it at $14 years ago and I don’t even want the taxes if nothing else. If Elon buys it from me, I’ll give it up. It’s not a very big account. I owned it for years and made a lot of money on other things over the years and put more money in my account over the years, and now it’s a small position and I like having bought it at the exact bottom. So I’ll leave it.
Cheryl:
When do you think SpaceX will go public?
Cody:
Never. Starlink will go public and other subsidiaries of SpaceX will go public, but SpaceX will never go public. No reason for Elon to deal with the scrutiny that a public company deals with when it’s a space company with lumpy revenues except for the Starlink part of the business. And I will write about this. Last week we turned on Starlink at my house. We ordered it a year ago, put in an order for it, and we received our satellite dish and our little Wi-Fi router unit and got them plugged in. And we live at the end of a town, at the very end of the telecom network and until we got this, our average speed was three to 10 megabits per second download at our house, and now we’re 100 to 400 download at my house. Thank you, Elon Musk. You guys know I’m a big Elon fan, not even fan, but look, I think he’s brilliant. I think he’s brilliant. And we’ve made a lot of money betting on his brilliance. But I get my internet from him, I see his satellites in the sky, he’s the space guy sending things to International Space Station, he’s involved in the Ukraine war, he’s buying my social network, the only one I ever use. I’ve got a car on order from him. I’m waiting for it. I just got rid of my other one that I bought from him. He’s everywhere. He’s in the Amber Heard trial. Are you kidding me?
Cody:
No more. Elon Musk is banned from this call, the rest of the call. That name is not mentioned. You guys cannot ask anything else Elon related.
Cheryl:
All right. Why is Uber down 11% today? Because of Lyft quarter?
Cody:
Not entirely. Let’s talk about it. Uber stock at the moment, 11%. What’s ARC down now? I just saw that Tesla is down huge in today, ARC down 4%. Look, I mean, this is a very ugly market and anything that is not clearly profitable in making earnings, profits of some sort, they’re getting slammed and it’s getting sold off. And the Lyft quarter was awful. And I’ve got a little bit of Lyft short in the hedge fund. I’ve got some puts in there as a hedge on my Uber. In my personal account, of course, I don’t unfortunately.
Cody:
But I will tell you, I told my wife this morning, I have to give her some real credit, because I didn’t really listen to her much at the time, but when we were in New York two or three weeks ago, we took Ubers a lot. The day we got there was the day that Brooklyn subway shooting. And I had my oldest daughter, my eight-year-old daughter and my wife with me and we weren’t going to be running around the subways after that. So we took Ubers everywhere. And frankly, we do that usually when we’re in New York, anyway. Point being, my wife apparently talked to every Uber driver like a good touristy person does, and she asked all of them, apparently, “Lyft versus Uber?” And after we got done, she said, “None of the drivers liked driving for Lyft.” In fact, several of them were not even driving for Lyft anymore because Lyft wasn’t being completely straight with them when you’re going to get this much money, but you don’t quite get that much money, and little nuancey things that apparently the drivers were annoyed with.
Cody:
And if you noticed, the Lyft quarter was not only bad, but the main reason it’s bad and the reason the guidance and specifically the profitability guidance is terrible, is because apparently they figured out they’re going to have to really try to invest and get these drivers back on their side. And frankly, it might be too late. Those numbers were horrible. The EBITDA guidance for Lyft is 10 million bucks or something now. This is a company that’s valued even now with billions, right? And so, Lyft was terrible. It does have some anti-halo effect on Uber, but Uber’s just also down because it’s not a profitable company and it wasn’t a great quarter. It wasn’t a terrible quarter for Uber, but it wasn’t great either. Next question.
Speaker 6:
I have a question about SKTLs. I know the object is to clean up space debris, but if you own any, is it ever going to have value? Is that the anticipation or not?
Cody:
It is the anticipation. I don’t know whether that value will be measured in tens of cents on the first day, or thousands of dollars on the first day. But there will be value. Someone like me, including me, really, literally, will go out and buy your tokens from you if you’re willing to sell them to me. Probably, and initially, it won’t be a dollar for Skittle. What would have to happen is, we’ll be on PancakeSwap or is it SushiSwap? I can’t remember which one. We’ll be on one of the swap exchanges, and then we’ll be on all of them eventually. But that very first day, you’ll have the ability, if you are competent in doing this, I’m not, I have people who are, and if you know how to do it, you can be like, “I’m going to go on that exchange and I’m going to sell half of my Skittles right now on this first day to anybody that wants them.” And I’m going to come in there, or one of my guys who works for me will come in there and I’ll be like, “Buy me a $1,000 dollars of SKTL crypto.” And they’re going to go in and bid one cent for each. And if you’ll sell it to them, you’ll get a &1,000 or something. But we’ll try to set that market as low as possible, because I’ll want to buy them initially. Over time, the idea is that our space artists, space consumers, space companies accept and use the Skittle token as a medium of exchange, and over time it becomes a store of value. And eventually the real goal is, in 15 years, 10, 15, 20 years that when you’re on Mars, you will buy a candy bar using one billionth of a Skittle for a Mars candy bar on planet Mars in 15 years.
I truly believe it will be worth something on Friday. It might be. I hope it’s just a tiny amount, frankly, but I hope that sets it up, that we have a chart that goes like that over years, that hockey sticks up to the right over years to come, over decades, rather than as many of these things do where the very first printed trade is up here at the top left and then the reality sets in and then it has to try to, one day, get back to where it first traded. So hopefully that value is very little the first day, but hopefully all of you who registered for this thing end up with something of value immediately.
Sunil:
So just speaking of Skittle. It just makes me think of something Cathie Wood said and I wanted your opinion on it. I know you don’t like to talk about price targets, I don’t think, but do you agree that Bitcoin could be a million dollars in four to six years like she says?
Cody:
No. No. It could be a million dollars in four to six decades.
Sunil:
So what’s your price target realistically on it? What do you think it can do in the next five, seven years?
Cody:
I think it can range from $10,000 to $150,000.
Sunil:
Thank you. Fair enough.
Cheryl:
So when you did that casket list, Verizon was number one on there. Is that because you’re looking at Verizon.
Cody:
Yeah. I mean, look Verizon at 46 bucks, what’s the yield now? When I did that basket, Verizon was at 51. It’s down another 10%. PE was 10.6. I mean, it was 6.6, now it’s six, looking out three years. Actually, now it’s 48 because the stock’s up a little bit today. The yield, 5.3%. I mean, that’s a good look in stock right there. I probably should have bought it yesterday. Problem is, is it revolutionary? It’s just sort of a commodity. It is a triopoly. There’s three competitors. Maybe DISH will become a fourth competitor, but the reason why I didn’t buy it is because what I did not show you on that spreadsheet is… Over to the right I have my algorithms. If you guys recall my winner and, I’m at a loss, willpower algorithms that run through valuations, revolutionary ratings, has a whole bunch of fundamental and objective and subjective inputs. And then it runs all these equations and comes out with ratings. And the Verizon rating in there did not come up very big. It was still a lowly rated stock once I ran it through my algorithm because I don’t know what the most you can possibly make on Verizon is. The upside potential is very important in that algorithm and in any, because risk, reward. You’re risking money, but when I risk money, most of the time I’m looking for a five, 10 or a 110, a 100 bagger, 50 bagger. Verizon’s going to go up. In the best case scenario, it hits 80, like it’s up 60% or something. So that doesn’t really excite me.
Speaker 9:
Hey, Cody. Can I ask you really quick on land and how you feel about land lately?
Cody:
Always love land. The reason I love land is because it is truly, you can’t make more. And secondly, there’s no upkeep most of the time. Generally there’s very low taxes on a chunk of land. So I own 300 acres out here and it is rural land and got a house and a two barns, and a donkey, and three goats and stuff on there, but… Go ahead.
Cody:
Do you have another question, Doug?
Doug:
Well, okay. It was funny that the previous subscriber mentioned land and that’s exactly what I was going to ask you. I couldn’t turn it down, a piece of land in Florida. It’s in a neighborhood. I want to build a house and I’m trying to rush this because these damn interest rates are climbing to the moon with the money that I’m going to have to borrow above what I’m going to put down. What is better? The interest rates, the building price, the interest rates going to go up, the building price is going to go down. You love land, but I got to put something on it.
Cody:
Why? Why?
Doug:
How should I go about building on it?
Cody:
Why do you have to put something on it?
Doug:
Because I want to retire and get the hell out of this area and move down there and relax.
Cody:
Yeah. But look, think this through, and I don’t know what area you’re specifically talking about, it doesn’t matter, let’s just talk through risk, reward scenario here, okay? At this particular moment, you’re sitting here stressing out because there’s this scenario that you think is the most likely scenario to play out, that a tension between higher rates and real estate prices are going to cause losses. Probably are. It makes the likely scenario that real estate values have to come down. I have a friend in New York, who’s a major developer in Manhattan and the building… They were going to buy at X when rates were where they were eight months ago is different than now. The price is going to have to be renegotiated because the cash flows don’t work out because interest rates have gone up too much. And so, can you take a step back? If you own some land, it’s probably going to go up in value in the next 10 or 20 or 30 years. So you don’t have to do it right now in this tension of interest rate, higher rates, inflation and housing prices not looking optimal. Prices are at all time highs. Why rush into it at this moment? Why build at this particular moment? And yes, maybe it is the right… I’m not saying you should, but I am saying, think it through a little bit. It’s okay not to. It’s okay to just sit.
Doug:
But then again, the fear missing out, sitting, and it continues to climb, the cost goes up. According to last year, the house that I want was 368 built, now it’s up to 398 and the interest rates are climbing. Can I afford all this?
Cody:
No. You can’t. So why mess with it? If you can’t afford it right now, why mess with it? Just sit tight, wait for this cycle to play out a little bit and then get on the other side of this. At some point it will be the opposite of this. At some point there is going to be people that don’t want houses. Millions of them. People who have bought millions of Airbnb homes are going to start unloading them at some point. Their interest rates are going to go too high, something. The cycles change, man. And at some point in the next few years it’s going to be, “Oh my gosh. Look at the economics now. I got three builders begging me to help get this project going. Interest rates have come down 30% from where they were two years ago, and lumber has been cut in half in the last two years. Now’s the time to build.” That’s what I’m saying.
Cody:
I’ll push one last comment back to you, and let’s move on, Doug. The last thing. I will just quote you back to yourself. The “fear” of blank… You used the word fear, man. If fear’s driving your decision, it’s the wrong decision every time. Next question.
Speaker 15:
Hey, Cody. What is the street missing on Intel that you see? Because everyone’s so bearish on it and it’s just AMD, AMD, and Intel’s going nowhere for many, many years.
Cody:
Thank you for asking that great question. I was thinking about this, I don’t know, yesterday at some point. I think the single biggest macroeconomic trend for the next 10 years is going to be, you guys have heard me say it, the domestication of all supply chains. You want to domesticate your supply chain entirely. You want to get your cotton, your shirt, your underwear, your razors, your toys, your plastic, your rare earth minerals, you want to get your chips, your cars, everything domesticated, and Intel is the only company in the Western world that can do this, that can domesticate your chip supplies. And so, you saw probably that they’ve been hired or they have an understanding to be hired to do it in Europe too. And the governments of Europe are going to subsidize that to the tune of tens of billions of dollars just like our own country is subsidizing Intel the two to the tune of tens of billions of dollars to get the fabs built, these factories that make chips built. I think that’s a trillion dollar opportunity.
Cody:
I mean, the difference between domesticating your chip supplies and only having one company capable of doing it versus, say, domesticating your car supplies with several companies who can do every stage of the car, competing. To me, this is the best risk, reward in the stock market that I can find right now because the downside… In some sense Intel’s like Verizon, but with an upside kicker, because Intel’s… Maybe they lose market share, if they do the stock dwindles 10 or 20% probably, and we’ll get out at 40 in a year or two if they can’t figure out this fab kicker trillion dollar business. But in the meantime you’re paid three or four, 5% dividend annually and you’ve got the potential trillion dollar market cap in five years if they actually become this incredible Western world dominant monopoly of fabs.
Speaker 15:
One follow up to that. What are your thoughts of China and Taiwan with everything that’s going on with Russia right now? How do you see that?
Cody:
I guess, to be frank, I don’t think it changed much. I mentioned this dynamic maybe six months or three months ago. When Russia first went into Ukraine I mentioned that we have to realize that China’s watching the world’s reaction and it will probably impact their approach to Taiwan. China clearly wants Taiwan. The US and the Western world, especially without their own fabs, cannot have that. Here is the single worst case scenario for the United States. China takes over Taiwan Semi and says, “We’re putting restrictions on shipping any chips to the United States.” Tesla, Apple, Google, Microsoft, everybody except Intel won’t have chips. Well, Intel and Samsung. Samsung makes their own chips.
Cody:
It is scary. And the worst thing would be if China did take over Taiwan, and what would be the most rational response for the United States as their last move, leaving Taiwan? I’m not going to say it out loud. I’ll let you think that through. It would also, I hate to say it, but also be incredibly bullish for Intel if the United States were to do the last logical move. If China took over Taiwan. Now there’s two ifs in that sentence and neither one is likely, but it’s that. Next question. Last question. We’re at one hour. I need to go look at the markets.
Neil:
This is Neil. I joined late. I don’t know if you answered the question about Ethereum. You sold all of your ETH and I was wondering why. I don’t know if you’ve answered the question already.
Cody:
I did not. And thank you. Neil, number one, crypto feels still way too crowded and there’s still a lot of fraud and silliness out there that’s got to get washed out. A lot of that fraud and silliness is built on the Ethereum network. Ethereum gas fees are way out of line with economics. You can’t, as a crypto builder… We tried to build on the Ethereum network and we ended up having to use the Binance version of the Ethereum network because the gas fees to build on Ethereum proper were way out of whack.
Cody:
Furthermore, the founders of Ethereum could be billionaires, but instead they’re 10 billion, they’re worth tens of billions, because they’ve probably been doing some stuff that’s not cool with issuing ether and originating accounts type stuff. I don’t want to lob anything too specifically out there, but I sure am uncomfortable with what the Ethereum founders have done to enrich themselves at this point, and it feels to me like the… I think there’s probably a pretty darn good trade right now in long Bitcoin, short ether, and a matter of fact, that is what I’ve done in the hedge fund. It’s a very small position, but I think Bitcoin will probably drop 50% if ether drops 90%, but I think Ethereum is probably needing to drop 90%.
Neil:
Thank you. That’s helpful. So you are staying put with Bitcoin? That was my follow up question. So you answered it.
Cody:
Yeah. Yeah. Personally I still own it, and even in the hedge fund I own a little bit of Bitcoin and I’m short less ether than I own in Bitcoin, but I actually even today have an order to short a little ether in the hedge fund if it rallies to 3,000.
Sunil:
All right. I’ll just make it short and sweet for the last question. I was just going to ask, in your email you referenced that you’re going to find several names that are 10 to hundred baggers, and I was going to ask, have you found those yet or when you do, will you email us and say, “Hey. These are the 10 to hundred baggers.”?
Cody:
Can you imagine if you paid for a service called Trading With Cody that it’s supposed to email you whenever I find something that goes up 10 to a hundred and I didn’t? Yes. I will email you. And I do think Roku could be one of them. I’m liking Roku, both on evaluation basis… When I put Roku through that model, it was just one of the names in the list that was down 70, 80%. I ran it through my casket of crashes and the PE… It’s not PE. I use the wrong term. That’s not earnings, it’s profits. So the PP is my new widely known Wall Street term, the PP. The PP for Roku five years out is single digits. We’re talking close to Intel/Verizon valuation levels if the company delivers on any reasonable amount of growth, and I made very safe assumptions for that growth model I put in there. So then I went, “I got to go look at Roku. Let’s stop. Let’s go look at Roku.” So I literally went over to that TV right here in my office. I’ve got one, two, three, four TVs in my office and I went in on the big one right there and I went, “I don’t have a Roku app anymore.” Huh. I need to play with the product.
Cody:
A few minutes later, get on the phone with my friend, hedge fund manager, short seller guy and he’s like, “Hey. I think you might be onto something with this Roku. This thing looks interesting and I’m doing some work. My wife asked me one question though…” And this was him talking. He says, “My wife asks, ‘What’s the mobile strategy? Sure you can get it on TV if you got a Roku TV, but everybody’s watching this stuff on their devices.'” I said, “I’m pretty sure you can just get the Roku channel on the device.” So I went to the app store. I’ll just do it right now. I went to the app store, downloaded this app called… Come on, get in there. Roku. Okay. And then I’m like, “Hey. Look at all the shows. I can start streaming for free. Oh, do I have to log in?” No, you don’t even have to register on the Roku app. Oh, I can mirror this on my TV right there. How much is Roku again? Wait, I don’t even have to register. So how much does it cost you? Zero.
Cody:
Now I’m the kind of guy Who loves to watch Some good old TV. I’m talking 40S, 50s, 60s, 70s, 80s, 90s. I love old TV. How about Quantum Leap? Every episode of Quantum Leap is on Roku. So Roku isn’t a hardware company. This is an app company and a content distributor that is sort of the anti-Netflix. Netflix is $18 a month. Roku is zero.
Cody:
By the way, there’s literally a section on here called “shows not on Netflix”. Because apparently Netflix and Roku have a lot of the same content on them, so does Samsung TV, by the way. A lot of this content you can almost get for free. This is a brilliant business model. Margins are very good on this. The longer term question would be, “Can they keep licensing this cheap content to keep this enough critical, massive content inside the app that people like me will watch it?” So look, it was not a quick and easy question after all Sunil, and it was sort of my answer that made it not so.
Cody:
I forgot your question now. What was your question?
Sunil:
What’s the 10 and hundred baggers that you might be seeing develop?
Cody:
Oh, yeah. Roku might be a 10 bagger. I don’t think it’s a hundred bagger. Rocket lab might be a- Rocket Lab might be a hundred bagger.
Sunil:
Dang. That was my question. I was going to ask about Rocket Lab. So you got it. Thanks.
Cody:
See. I’m reading mids over here, people. Now I’m going to go read the markets. All right. I hope this recorded. I will send this over to the transcriber service and get it transcribed, and get this out to you guys probably tomorrow. Thanks for being here. Thanks for the questions. Peace, love and happiness. Be careful out there. We’re getting closer, but don’t rush in. Fools Rush In, bad romantic romcom, as I recall, from the 90s.
