Bear Market Plans, Economic Debate, Intel, Cutting PYPL In Half, Onshoring, Etc
Here’s the transcript for this week’s Trading With Cody Live Q&A chat. Please note I sold half my PYPL as I mention below.
Q. What are our strategies if this Bear Market last for another 3 quarters or so?
A. The bear market might just slowly bleed lower for months and/or the market can stay in a lower range for even years. Great companies in Revolutionary sectors will grow their topline, their earnings and their stock price will go up over the next few quarters and especially over the next five to ten years. So the plan is to keep the portfolio lean and mean but to keep finding new names in new Revolutionary sectors and to scale into them whenever they get hit hard. Slowly but surely over the next few months.
Q. Is inflation is cooling because we are headed toward a recession? Will the Fed be forced to cut rates; stocks will soar and then MORE INFLATION?
A. I’m not sure stocks will soar if/when the Fed cuts rates next time. Lots of moving parts in the inflation and economic front and I’m only sure that it’s not the same kind of inflationary, economic and central bank set up that we were used to for the last fifty years.
Q. How, with debt to GDP at 130%, is inflation peaked? Much of the inflation is driven by energy supply issues due to administration policies both here in the US and in Europe, which has knock on effects on everything downstream of energy and petroleum including food (fertilizer, diesel, etc). The other major factor is the supply chain supply issues from the combo of the great resignation.
A. I’m not sure inflation’s peaked, as much as I think the rate of inflation has peaked. I’m not sure inflation is about to drop anywhere near the 2% target of the Fed, but I am pretty sure that inflation isn’t going to run at a 7-9% rate like it has been.
Q. Given the food and energy inflation along with the other goods in the market sapping the consumer spending power, and given consumer spending is something like 70% of the economy, how do we not head into a protracted recession from the inevitable reduction in economic activity? Particularly given the dire economic consequences of the energy cost in Europe affecting their industrial production.
A. We might be, I think we are already in a recession. But I think the economy and money and people and ideas and information — and therefore, economies, move MUCH faster than they ever have in written history.
Q. Given the debt to GDP, how are we not headed for a long term period of stagflation (like the 70’s) as the ratio is inflated away?
A. We could be, but then again, life with instant movement of information and money being run on apps and Internets and space satellites and all the other wondrous changes that technology has provided since the 1970s stagflation era will make this era very different and probably much quicker.
Q. What is your game theory on how the US gets back to something approaching a normal 2-3% GDP growth economy from where we are today?
A. Pray and hope that economy/technology move faster than the Republican Democrat Regime and the powers that be can stop endlessly siphoning off our productivity and prosperity enhancements.
Q. I’ve been following for years and have been a subscriber for the past few years. When you say your are making a stock a large position, what percentage of your portfolio would a large position be? Each of us has to define our own risk, so a large position would vary for each of us.
A. Thanks for being here. I might make a position close to 10% but that’s about the max and I rarely go that large although my personal account still has an outsized TSLA position as many of my subscribers do because we made it our largest position and then it went up nearly 20x. In general, 8% is probably a pretty aggressive large position to start with.
Q. Hi Cody. Thank you in advance for taking the time to answer our questions. I have several questions for this week’s chat. Can you please provide your take on Intel’s quarter? Do you still have the same level of conviction on this company?
A. I think the PC business is shrinking as millions of people in silicon valley and at tech startups around the world have lost their jobs and the companies they worked at now have millions of extra PC computers that they just bought in the last two years laying around. Apple’s Mac business was down 13% year over year, for example. That said, the problem with a big miss like Intel had on earnings last night is that it’s no longer as cheap as it was before, since we have to question and/or lower our earnings estimates for Intel for the next few quarters. Intel, in some ways, reminds me of Meta now — both are relatively cheap looking back on last year’s numbers but are getting more expensive as the last couple quarters have been so bad that analysts have had to take their estimates for the future earnings lower…but they both have a potential trillion dollar business kicker that they are by far the leaders in and which will take at least another couple years or so to be far enough along for the markets to believe in them. To finish answering your question, I can’t say I still have the same outsized conviction that Intel’s going to pull all this near-term market share taking off but I still have the same conviction that Intel is probably going to become a trillion dollar semiconductor fab business in ten years.
Q. Any change to your analysis after the INTC quarter report yesterday? Would you be a buyer? At what price?
A. INTC was ugly. I’m not changing my stance though — I’ve said all along I’d buy more near $30 if we get the chance. Sitting tight for now, as the trillion dollar fab business upside potential is still there.
Q. Please comment on INTC dividend. I believe you mentioned it was under pressure, and thought their chief inferred that it was safe?
A. Yea, we’ll see in a year though.
Q. Listening to the last 2 conference calls, Gelsinger talks a lot more like an MBA than an Engineer – I hope it’s a show for the analysts and politicians, and behind the scenes he is absolutely furious and ripping on people. “TIkTok Execution” and “Smart Capital Strategy” are Intel’s terms for performance improvement and government subsidies, please. Maybe the software world has made him soft?
A. Yea, he’s definitely playing the lobbying game right now, as he probably should be given that there’s national security on the line for the US and it’s the one of the very few times in my life I think the government should subsidize a private corporation — again, bringing the semiconductor supply chain industry to the US is a matter of national security. But he also sure as hell is raising hell inside the company and trying to get them whipped into shape.
Q. Are you trimming any TSLA here? If not, then at what level might you consider trimming some?
A. Mostly sitting tight with my TSLA here.
Q. $TSLA: Giga press analysis by Sandy Munro. This is why $TSLA is still my biggest holding. The advances in manufacturing by Tesla within this few years are the types of manufacturing revolutions that US need to compete with China.
A. Amen.
Q. Cody seems like TSLA fits the onshoring theme or thesis.
A. Yes, agreed, one of the reason I’m holding it tight. It’s the only manufacturer who’s already domesticated its respective national supply chains and it’s also got the robot kicker potential.
Q. Beyond the obvious of semiconductors and pharma/med device, what do you think the other industrial segments that will lead the onshoring will be?
A. EVERY segment of manufacturing will invest in onshoring: underwear, golf balls, ski boots, robots, semiconductors, solar panels, shoes, chairs, foam rubber, dry wall, glue…. much of it will get onshored in the next ten years.
Q. Can you please provide your analysis on LLAP and ROK? I’m excited about these names but would like to see your write up. Admittedly, I’m a little hesitant on new names and the analysis would certainly help.
A. Yes, I will. I’m trying to get through earnings season and it’s been a busy couple of weeks. I’ll send out the analysis on LLAP early next week. ROK asap too.
Q. Would you add more ROK here or wait for pullback? I have around half of what I consider a full position now.
A. Maybe another 1/10th sized tranche and then wait a few days.
Q. On the flip side, Amazon’s earnings seemed to be great and the stock is up significantly today. Any change to the Amazon rating? Did anything stick out to you from their earnings as an approve catalyst going forward?
A. I was not as impressed with Amazon’s earnings as the market appears to be today. Amazon, like a giant bank, has a lot of room to play with their earnings reports each quarter but the topline is the important one that can’t really be fudged much in Amazon’s case. Topline growth was 2% better than expected, at 7% year over year growth. That’s fine, but not impressive and certainly better than feared.
Q. I’m surprised by how low some bio-tech names are getting. Not sure how they can be trading so much below cash value. Some of these stocks, even if you assume their drug pipelines are worthless, could distribute cash 2 or 3 times their current stock price. Some of the names I’m looking at are FIXX, SLDB, CYCC and PASG. What do you think could bring bio-tech out from the dead? Thanks much.
A. The problem with those biotech stocks that are trading below cash is that they are burning that cash quickly and they aren’t going to distribute the cash they have on the balance sheet. I think biotech could come alive if the FDA ramps up the rate at which they judge these things the companies are developing.
Q. In last week’s chat, you mentioned you were cooling off on Uber. With inflation (hopefully) starting to abate, gas prices coming down and tech stocks (hopefully) becoming favorable again, is now the right time to reduce Uber exposure? Consumer spending and travel is up which should benefit Uber as well as all their other lines of business.
A. Yes, all true. I’m holding mostly steady with my UBER position for now. On the other hand, I’ve taken about half my PYPL position off the table here. I’m trying to find stocks in more Revolutionary sectors, as you all know. Which is the same reason I’m right now in the hedge fund trimming down AMZN, GOOG pretty significantly.
Q. Lastly, I really enjoyed your note yesterday. The “five things I learned this week” should be a weekly email! I truly do appreciate your unique insight/perspective and your emails are must reads for me. Thank you for also notifying us about the second ROK tranche. Thank you!
A. Thank you for the kind words.
Q. I know Roku is no longer part of the portfolio, but the stock is down significantly today after earnings. Anything specific from their earnings report jump out to you?
A. Was ugly. Staying away.
Q. With Ethereum going away from Proof of Work to Proof of Stake, most miners dependence on GPU mining will reduce. Shouldn’t AMD be worried?
A. Yes, I agree. I’m short some AMD in the hedge fund.
Q. Cody I still believe in you and I know the sun doesn’t shine on the same dog’s *** everyday, but you haven’t seen a ray of light in a long while. I WILL KEEP THE FAITH!
A. ROK? IBB? XBI? Getting us out of so many names last year before the crash? Sticking with TSLA? I mean, I can’t say I’ve been on fire lately, but it’s not been sunshineless around here either, no?
Thanks for the great questions. I leave you with a picture of what I plan on doing with Amaris this weekend at least one or two times…napping:
