A perfect investment, Dirty vs clean, and Baker Mayfield forgot something

Here’s the transcript from today’s very interesting Q&A chat that ran so long I broke into three parts:

1 Politics/markets/economy
2 Individual stocks
3 Cryptos

1. POLITICS, MARKETS, ECONOMY

Q. Have any of your buys ever been a “10”? Just curious if this ever happened before, and which companies reached this pinnacle?

A. No, no trade or investment can be perfect, by definition. 9+ is the highest rating I will ever give. What’s perfection in trading/investing anyway? A guaranteeD 10,000% return? Why not 100,000%? Would the perfect trade mean that you end up with all the money in the world after the trade is over? That doesn’t sound perfect either.

Q. Cody, what is your feeling on climate change both as an investment thesis and a societal danger? Obviously you have favoured green investments (tsla. sedg, fslr) over fossil fuels (a stated dislike of oil stocks), but can you elaborate on this a little bit? How is the space revolution related if at all?

A. The world knows that burning fossil fuels is dirty and expensive to distribute. Of the renewable energy subsectors, solar has the fewest moving parts that can break. Solar will eventually be the primary way of powering the Earth’s energy requirement, maybe within 3-4 decades from now. There are too many people on the Earth, too much plastic, too many pollutants in the soil in some of the most populated places on Earth…that it’s exciting to picture the ability to create colonies outside of this place. Also, colonizing space gives humans a chance to at least get some redundancy in our path to long-term survival. Climate change per se isn’t necessarily a primary part of any of the above analysis though — it’s also just a recognition that clean is better than dirty.

Q. Shall we make use somehow of the current wild swings in a short term trading?

A. Back in August and early September when I was trading the wild swings in the stock markets, the swings were 3-5% each way. Lately the swings have been 1-3%, which makes it harder. I’m mostly focused on streamlining the portfolio and finding great pitches in individual stocks to swing at.

Q. What makes you believe a 2001 / 2008-type selloff isn’t emerging, with an air pocket pocket violent plunge lower from here?

A. Man, I try so hard to answer this question in all of my collective and individual writings on Trading With Cody. There’s certainly a risk that the markets crash here, but for all the reasons I’ve outlined in the last few months, including how the US is being flooded with money fleeing negative interest rates around the world, keep me cautiously bullish (for now).

Q. You mentioned that your analysis doesn’t show risk of a crash at this time. Could you explain some of the metrics that lead you to this conclusion – without divulging proprietary stuff of course.

A. Oh, let me be clear that I’m not saying there’s NO RISK of a crash at this time. I’m just saying I think the odds favor no crash right now. I’ll keep writing more analysis and explaining my outlook as it goes.

Q. Gold / Silver / TLT: Seems like an interest rate spiral to zero is a real possibility. I understand that worldwide demand for US Treasuries can keep rates up near 2% perhaps, but with any USA softening isn’t it likely that gold and long bonds are a slam dunk? It’s difficult for me not to feel gold is going to $2000+ and bonds to near zero.

A. I think demand for Treasuries yielding less than 2% isn’t enough to take them to 0% anytime soon. I don’t disagree with your gold analysis, but there’s risk that rates spike and gold crashes too.

Q. Hi Cody… on a scale of 1 -10, how do you think Trump is handling the trade war thus far?

A. Hmm, the premise of the question seems to assume that “the trade war” (with China, I assume, is what you’re asking about) is something he was forced to handle instead of something he created. I think most people in the US agree that we needed to confront China, and we’ve been in a global currency war for years anyway, so in some sense, there’s always been a trade war. Which means your premise makes sense. Anyway, scale of 1/10 how Trump is handling the trade war with China, I’d probably give him a 5/10. I don’t trust his motives — for example, I think like most people that he’ll declare victory before the election to help juice the stock markets next year. And if he were really about trying to win a trade war, it wouldn’t be about winning the election, see? I’m equally leery and cynical about Trump as I was about Obama as I was about Bush as I was about Clinton as I was about the other Republicans and Democrats who have been President.

Q. Cody, agreed. I too am cynical about motives and am frustrated as an investor. With today’s trade war news, it seems to me like tech stocks are becoming the battering ram of choice to try and break China. But ratcheting up tariffs and blacklisting more Chinese companies (and now possibly banning government pension funds from investing in publicly traded Chinese companies) hasn’t worked so far, why does Trump think it’s gonna work now?

A. Theoretically, he’s just continually reminding the Chinese leaders all the different ways that the USA can mess with China.

Q. Cody… And why does the heat always seem to get turned up right before talks? Does Trump even want a deal? Is there some other goal on Trump’s radar that we aren’t aware of yet? Is there a point in which the trade war talks become irreparable, and one or both sides totally abandon talks?

A. I keep saying that I’m not sure I understand Trump’s motives (or goals) in the Trade War. The point at which the trade war talks become completely irreparable would be created by an actual war (such as a complete takeover of Hong Kong or Taiwain by China), IMHO.

Q. Cody. Ukraine-gate, What do you think are the odds of an impeachment and an indictment and how should we play them as they unfolded?

A. If what Trump did with Ukraine was illegal and corrupt, I’m pretty sure what Biden (Obama?) did with Ukraine was also illegal and corrupt. It’s amazing to me how both sides of the Republican Democrat Regime apparently use the same playbook all the time and then point fingers at each other and pretend the “other side” is guilty. Remember when Bush and the Republicans bailed out the banks and the auto companies and then Obama and the Democrats continued doing the same. Both sides pointed at the other and were like “they don’t follow the rule of law” — and they were both correct. It’s also amazing to me how voters will let themselves be held hostage by these two parties in which this stuff all passes for “normal.”

Q. So, those Cleveland Browns… sell and take the loss or buy the dip?

A. Maybe Baker Mayfield forgot that “you’ve gotta win.” I’ve become a seller of the Browns since the dude was out there talking crap like this quote when he’s got like maybe 10 victories in the NFL in his whole life: “I cannot believe the Giants took Daniel Jones. Blows my mind. Some people overthink it. That’s where people go wrong. They forget you’ve gotta win.”

Q. Since we are talking politics, if you look into your a bit too early crystal ball, how much does market go down if Warren wins?

A. The Cleveland Browns discussion too political for the chat room? Oh, wait, you mean other politics. To answer your question, I’d point out that usually when EVERYBODY agrees that the market will do go down big if XYZ happens, that the markets open go up when XYZ happens instead. I don’t think Elizabeth Warren will be any worse for the profits of corporate USA than Trump or Obama or Bush or Clinton were. You don’t get a Republican Democrat party nomination if you’re not on the side of the guys funding those parties. If she wins, the market might fade a little bit for a day or a week but more important than her winning will be what the state of the economy/profits/global currency wars are at that time.

2. INDIVIDUAL STOCKS

Q. What do you think of Tesla Call option with strike price of $250 dated March 20th or Jun 19th next year? This would give us time until 2 or 3 quarter results and good enough time for Chinese Gigafactory to be up and running and probably generate some profit. Thanks a lot for your analysis.

A. See the prior answers about why call options are so much riskier than just buying the stock. That said, a little bit of capital in some call options that you outline there might be okay — the premiums on those call options for TSLA are always rich though.

Q. Tesla: I truly see its potential. Are you concerned about shareholder dilution, or potential bondholder squeeze due to cash crunch / balance sheet weakness? I heard there are a lot of sweetheart convertible bondholders who could cram down shareholders if there’s a cash squeeze. Elon is spread so thin it doesn’t seem too far-fetched in the event of recession or whatever?

A. There’s possibilities of debt and crash issues at Tesla. It all depends on how many cars Tesla can sell in the next year. If they sell a 500,000 cars in the next 12 months they’ll be probably not need more cash. If they sell fewer, it’s trouble. If they sell more, it could be gravy. Elon’s stretched thin, but he’s brilliant and it’s good to bet on brilliance.

Q. Cody Slack is a great platform. I am an enterprise exec with 30+ years of experiance. I do not think that Slack with take over Corporate Communication. Two years ago Slack made a giant mistake by taking adds on Wall Street taunting Microsoft. Since then Microsoft has come back with their answer to SLACK in terms of TEAM. It is equal or better product. One needs to understand how Microsoft sells its product in Enterprise. In Microsoft Enterprise agreement products like TEAM are bundelled in. It dose show up a line item with a seperate price. Last I checked Microsoft still dominates Corporate in Office Products. TEAM is part of Office Products. I am not saying that SLACK is not a great product and it will be used in the market but they will not become the defacto standard for corporate communication. The incremental difference between TEAM and SLACK is not there. SLACK will dominate developer, Universities and Technical Communities and will lots of money. It dose show up a line item with a seperate price. Last I checked Microsoft still dominates Corporate in Office Proucts. TEAM is part of Office Products. I am not saying that SLACK is not a great product and it will be used in the market but they will not become the defacto standard for corporate communication. The incremental difference between TEAM and SLACK is not there. SLACK will dominate developer, Universities and Technical Communities and will make lots of money. But it will be #2 player in corporate communication.

A. Slack is definitely bigger in small and medium businesses than in giant corporate USA so far. But the big companies are moving to Slack too — they’ll follow the little guys on this one. I have almost never seen anybody use TEAM. Meanwhile, when I go the Vail investment ideas conference, we use Slack. When I collaborate with other companies, they almost always use Slack, not email, and certainly not TEAM.

Q. Saw your comments on WORK…. why is it better than other communications?

A. It’s more streamlined and organized and integrated than other forms of communication such as text or email or Snapchat.

Q. I’m also trying to get up to speed on Slack Cody. I have a new prospect who is an account manager that WORK and hope to learn much more in the next months. Also what about Zoom?

A. Please let us now what you learn about Slack and I hope the prospect becomes a client. As for Zoom, that’s twice today people ask me about ZM like this. I’d rather own Slack WORK (worst ticker ever).

Q. Any thoughts on ZM? Somebody else I subscribe too admits wildly expensive but says has “long runway for growth” and is one of her favorite long term plays.

A. I just like Slack WORK (worst ticker ever) better than ZM. I’m shocked at the success of ZM in the corporate market place and I am doubtful it remains as sticky as Slack will.

Q. Cody are you buying more Snap or Uber here?

A. No, not right now. I might nibble SNAP at $14 and as for UBER, I noted in the Latest Positions update yesterday: “I might buy more if it got hit down below $25 in a panicky sell-off or something like that.”

Q. Softbank weighing on GH, WORK, UBER?

A. Yes, the whole depressed IPO world is weighing on them. You know it’s usually good to buy a depression though.

Q. Nibble on WORK here?

A. I’ve nibbled some here and at lower levels. I like WORK a lot, but I can’t overload it.

Q. Can you please comment on your GOOG calls? Thanks.

A. The short answer is: Painful so far. The longer answer is that Google will need to report a very strong third quarter earnings report on October 28 or these call options will be big losers. I do expect Google’s firing on all cylinders but it’s quite a bar to get these call options into big winners. This is a classic example of why we shouldn’t use call options too often and why I mostly stick to common stocks except for a tiny bit of capital.

Q. Buy some QCOM call options?

A. See answer about the Google call options. Call options are so risky because if the stock just stays flat or barely goes up, you can lose everything on the call option whereas if you’d just bought the stock, you’d be flat or slightly up. I think Qualcomm’s set up to go much higher over the next 3-5 years as The 5G Revolution goes mainstream. But the stock could be flat or down for the next year or two if the market doesn’t recognize the revenue and profits that Qualcomm will grow to in time for your call options to work out.

Q. TLRY was last year 300, now around 23, shall we buy?

A. Here’s something I wrote just about one year ago: “Anyway, I took a look at TLRY this morning for the first time since it came public a few weeks ago, and my first reaction, second reaction and final reaction was: Wait, what? ‘Tilray, Inc. engages in the research, cultivation, processing, and distribution of medical cannabis. The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc. was incorporated in 2018 and is headquartered in Nanaimo, Canada.’ The company was just incorporated in the last 250 days and is now worth $11 billion? TLRY trading at 80x next year’s sales estimates too. $TLRY has 240 employees? The market cap is like $45 million per employee. For comparison, if Amazon had a market cap of $45 million per person, its market cap would be $22.5 trillion. The good folks in the Trading With Cody Chat Room asked me if there was a good opportunity to short TLRY here. Well, the problems with trying to short this one or buying puts on it, are: 1) It’s at least a real company, it looks like to me — it doesn’t look like a scam pot stock. 2) There are billions of dollars looking for legit-cannibis-related stocks, and this is one of the very few that can supply to that demand. But I will tell you that I don’t think TLRY is a good long at $120 where it’s trading as I’m typing this. A $10 billion market cap for a start up doing $150 million in sales seems more like a short opportunity than a long opportunity. I expect TLRY will be back near $20 per share sometime in the next three years, but I’ve no idea what the stock might do along the way.” Cody back in real-time 2019 — I remembered that I’d predicted TLRY would crash from its highs, but I had no idea I’d predicted it would fall to $20. FWIW (and it’s not worth much), I’m declaring victory on this prediction. I still wouldn’t buy TLRY though. I’d rather own CRON, CGC and/or GWPH.

Q. At what price are AMZN, FB, GOOG SCREAMING buys?

A. $1650, $1050, $160.

Q. Cody – in your positions email, did not see a rating for IPOA. Does it fall under “Private holdings in space companies?”

A. I guess I missed the IPOA write-up too. It’s publicly-traded so it’s not a private investment. I’d rate it a 7/10 after it’s rallied 10% in the last month on no meaningful news.

Q. What IPO short, if you had to pick one?

A. I don’t know off the top of my head actually. Maybe because we’re 90 minutes into this intense chat.

3. CRYPTOS

Q. Ever done any work on the crypto, Chainlink? Thoughts? $LINK.

A. Great name for a cryptocurrency, but no, I haven’t looked at it. Sorry.

Q. Have you looked into IOTA at all? I did some IOTA/tangle research a few years for security applications when I was working in fintech but there was little traction back then. It seems to be gaining steam more recently with $STM and other semi co’s releasing development platforms for IOTA based micro-payments.

A. I’ve seen IOTA around, but I’ve no feel for whether it’s catching traction here. Bitcoin bitcoin bitcoin.

Here’s one more pic from my NYC trip and we’ll call it a wrap on this chat.