Best Way To Hedge, How To Safely Trade For A Living, Favorite CNBC Personalities, And More
Here’s the transcript from Friday’s Live Q&A Chat where we discuss a lot of fun and interesting things including a talk with a recently unemployed dealer from Las Vegas, my hopes that we can create a metric time system, whether Elon’s “insanity” is helping or hurting Tesla, my favorite CNBC personalities, the five levels of money managers, and much more. You can watch the full video here.
Cody:
Let’s rock and roll. Ask me anything. I’ll give a small commentary to start. Volatility is back. I guess it’s been here since really late February. I’ve found myself trading again a little bit, as you guys have seen. Trimming some on the rallies, nibbling some on the crasholas. But in general I’m still just staying mostly defensive, heavy on cash, got some good hedges on. I covered some of those hedges into the weakness, but I still have some short exposure, still have some cash, and still have my longs.
I was reading an article today that was talking about the five levels of investment managers. Here’s the article. I’ll probably write something up on it actually, as it was really well written and I want to read it again and then maybe put my notes into it. The five levels of investment management in this article are considered to be:
- 1. Apprentice — learning the game
- 2. Expert — mastering the game you were taught
- 3. Professional — making the game you were taught fit your own strengths and weaknesses
- 4. Master — changing the game you play as part of your own self-expression and operating at scale
- 5. Steward — becoming part of the playing field itself and mentoring the next generation.
And one of the things he talks about in the article is something that you all have heard me say many times. I actually took my oft-quoted quote originally from a horse racing gambling book that Jim Cramer suggested I read by Andrew Beyer: “You want to bet big when you really like the risk-reward.”
Stanley Druckenmiller in this article was quoted as saying maybe two or three times a year he’ll want to bet big if his cards are right. And you have seen me pretty conservative for a while here, and that’s okay. We don’t need to be so aggressive all the time. Don’t like the risk-reward? So wait for great pitches. And then you’ve seen me also in times past get very aggressive when I do like the risk-reward. So it is what it is for now.
Subscriber:
Cody, good morning. The Chinese rhetoric, which is beginning to play out once again, could adversely affect some of our names in the portfolio. How would you go about positioning yourself with all the economic headwinds already facing us and now China trade back at the forefront, i.e., Qualcomm, Apple and any other names that have material business there?
Cody:
I don’t know that anything has changed with The Great US-China Trade War, as I’ve called it for a year and a half or two years or whatever it’s been, with the weekend’s headlines. These are just continuations of where we were. And while the coronavirus crisis took all economists’ eyes off of The Great US-China Trade War, that doesn’t mean that it was over. It just wasn’t being focused on.
For the last two and a half months since the coronavirus crisis started locking down the global economy, I’ve been talking a lot about how China’s political power, global political power, their place on the global political stage is fraught with problems, and diminished, and in bad shape. Nobody’s cowering to China’s will right now. Maybe some countries in Africa or something, but dude, I mean, the people in the United States are angry, people in Canada are even more angry, the people in Australia are angry. Everybody wants to know what happened with China’s handling of the Coronavirus Crisis — why did they allow this to escape and develop in the manner that it did and to infect our country and affect our economy?
Look, China’s going to cower to whatever the US wants for a while, I do believe. They can threaten whatever they want, and be like, “Oh, we’re going to retaliate against Apple and Qualcomm and your big companies too.” But they’ve got nothing. They’ve got no power. It doesn’t mean that that’s a positive thing. Like I’ve also said all along that the great China-US trade war is not really that big… like the much bigger forces are moving our economy and moving the companies and moving the technology, so I’m not changing anything because of that. But it is more of the same and yes, it’s a headwind for the near-term.
Subscriber:
Cody, have you found any shorts recently other than TLT?
Cody:
No. I mean I’ve still got some of those shorts that I’ve talked about, but I don’t think I’ve got any new ones per se. The GLUU short, that thing’s been painful. I had to cover a bunch of it for a loss. Still short part of it. But that was not fun. Luckily, I never make my shorts big. I mean I’m a long investor. Revolution investor. Shorts are a hedge. So I make them very tiny, and so it doesn’t end up hurting too bad, but any loss makes me mad. Could have done better, should have done better, shouldn’t have been short Glu apparently.
But what drives me crazy with Glu for example, and it’s a small cap company (though now it’s got bigger cap, it’s doubled). But I actually subscribe to an app review service that consolidates all of the new reviews for whatever apps you want to follow, and I follow the three or four apps that Glu Mobile depends upon. And the reviews are always horrible. I mean these apps are basically scams. Like a home decoration app or a fashion app or whatever it is. You’re supposedly competing against other people, but in order to win anything you have to buy $10, $5, $20 worth of these jewels or something. I don’t know. I played the game to study it a few times, and it was horrible.
And the graphics are lame, it looks like something from like 2008, 2010. But meanwhile, like the app started being downloaded more and it looks to me like the company’s even paying people to write up fake reviews and to give fake five-star reviews without any comments just to keep their four and a half star ratings on these apps, which consistently have one or zero stars from the people who are reviewing them. Things don’t always go according to the timing that you expect they will. I would expect in five years that Glu Mobile is much lower than it is right now, ust under $10.
Anyway, that’s why shorting is hard. I guess I segued a little bit out of topic there, but not really, because it’s relevant. That’s why you don’t see me talk about shorting individual names very often. When I do it I mention it in passing and I mention that you keep them very small. My index hedges are bigger, much bigger than my individual name shorts. So what are some shorts I like here?
GoDaddy, GDDY, but again, it’s not a bad company, I just don’t like being a customer of the company. A GDDY short doesn’t necessarily have a great thesis though. It’s not like I think GoDaddy fraudulent or something. It’s just been on my radar. So no, nevermind. Not GoDaddy either. Enphase, ENPH, would be a good short hedge against my SolarEdge. I don’t like Enphase’s technology nearly as much as I like SolarEdge’s technology.
Oh, Burlington. Burlington’s another one, maybe. Again, keep these very small. These are some ideas. I wouldn’t go try to make a bunch of money shorting the names I just mentioned. If you want to try and hedge a little of your portfolio with a tiny bit of some shorts.
Subscriber:
Good. This may be old news, but recent filings for Virgin Galactic shareholders say that Branson and Virgin Holdings filed the sell of 100 million shares of Virgin Galactic, does that change your thoughts on SPCE? Does that change your position in any way?
Cody:
No. Did you see the motivation behind it? Branson and his Virgin Holdings company have a billion dollars of value that they own in this thing or something. They’re selling some of it to try to keep their other businesses alive. I’m not thrilled about that. I would prefer that the shareholders, that the founder doesn’t use the value that we find in this company to prop up his other holdings. But at the same time, this is one of those where we’re betting on Richard Branson, and in that sense he’s got this whole structure of careers and businesses and investments that… there’s some leaning on each other.
So if we’re going to bet on Richard, we’ve got to bet on Richard, and I do trust him, right? I don’t think the guy’s a scumbag and like selling the stock that I’m buying just so he can pocket the money or something. I really do think he’s trying to keep his Virgin Airline employees fed a little bit better than they otherwise might have, or keep that business at all in existence so that… If you also think about it, years ago in some sense, those other businesses funded Virgin Galactic. It wouldn’t exist without the other businesses having created value that he was then able to take out and put into this.
I’m not thrilled about him selling, but I trust his motivation and I roll with my remaining SPCE shares for now.
When I was a big-time TV star, when I was almost famous a long time ago, I had people that did cameras in my earphones. Now I’m like multitasking. Pulling it off, don’t worry. Flying colors. First time I ever heard the phrase flying colors, my dad was a veterinarian here in Ruidoso, and I was probably seven or eight years old, and I was going for the AAHA, the American Animal Hospital Association, designation.
My dad ran a very clean, tight clinic anyway, but we spent a month just doubling down on cleaning everything, putting any new baseboard that was loose, etc. And I’m sure there was a whole million other things my dad was doing behind the scenes to prepare for his inspection. I was eight years old helping my dad for $1.25 an hour I think he paid me at that time.
Anyway, he passed it with flying colors. That’s what he told my mom. He was like, “We passed with flying colors.” And I had to ask my dad, “Flying colors?” To this day, I don’t even know what that means. I should google that sometime. The etymology of flying colors. I hope you guys are having fun in here.
Subscriber:
Hi Cody, would you repeat the rationale for exiting MSFT? Thank you, nice haircut.
Cody:
My wife’s going to love to hear that you like my haircut, since she’s the one who gave it to me. As for Microsoft, it’s not like I bought that and thought I was going to go sell it a month later. If you’re betting on MSFT, it seems to me you’re really betting on the cloud growth business continuing to grow and that the other businesses can just… And of course there’s Office and some of the… the Cloud 360 or whatever that is growing too.
But what I don’t like about Softy is like… let me give you… the other trillion dollar companies… Apple, I’ve owned it for 18 years, and it owns the smartphone market along with one of our other trillion dollar companies, Google. And the smartphone, mobile, computing… that’s the future, and I don’t see how Microsoft ever gets back into… It’s not like app developers are going to start building their apps for a third platform.
Microsoft’s core businesses are growthy, but when you buy an Apple and Google, you buy the dominant control of the entire billions of units of every year sold of smartphones. Then Amazon, I mean Amazon is still growing and dominating retail in this country and taking market share and it’s got the voice revolution and it’s got Jeff Bezos driving it. I get excited about the long-term potential upside about these three companies.
The more I analyzed Microsoft after I bought it, I wasn’t comfortable that there was enough probable upside of a double, a triple, of it becoming a three trillion, four trillion dollar company, up from $1.4 trillion right now. It could do it, but again, my brain’s going risk-reward, risk-reward, and I think Microsoft could hit $120 again, and I don’t think it’s as likely to double or triple over the next five to 10 years, as per other trillion dollar companies. And I want to go find the next trillion dollar company, not sit around writing the $1.4 trillion company that’s already there that I didn’t own like I did with Google, Apple, Amazon, for years and years before, before they were trillion dollar companies. Now I’m just riding them.
Subscriber:
Cody, regarding DVAX, how many tranches have you bought? I like the idea, especially the adjuvant and the hep B play. Hope they don’t get overextended chasing COVID vaccines and bird cash.
Cody:
What I like about, one of the things I like about DVAX’s, Dynavax’s approach here is that it’s not like it’s trying to develop the COVID vaccine entirely on its own. It’s partnering with 10, 12, maybe 20 different institutions of different sorts, whether for-profit or not-for-profit, that are developing and spending money trying to develop a vaccine.
But those vaccines need an adjuvant. An analogy that you can make here is that if you create the vaccine and administer it without the adjuvant, you might build enough supply for even 100 million people. But if you use the adjuvant, you could use the same dosage that you had built for 100 million people and actually get maybe 500 billion or a billion people, because the adjuvant allows you to use less of the actual vaccine to generate the body’s response that is required.
And this is just a play that gives us some broad exposure instead of just picking one vaccine play. It gives us maybe 10 or 12, if any of those work, and they might not. Then of course you still have the value of Dynavax’s adjuvant anyway, along with especially their hep B and other potential antiviral vaccine stuff that they’re developing.
Any other questions in the Zoom chat? You guys are intimidated by the suit today, aren’t you? Next time I’ll wear a T-shirt again, that way you can feel comfy.
Subscriber:
So back to your Microsoft… part of the discussion. As you look at say Apple and what got Apple to this point versus where it’s going in the next five to 10, how do you wrap your head around that, with buying it a dollar now it’s $300? How does $300 become $1000 over the next few years?
Cody:
Again, I do think Apple can become a five trillion dollar company in five or 10 years. The smartphone business itself, they’ll sell a billion smartphones a year all by themselves some day, maybe in six years, if the world can continue to develop and bring a few hundred million more people every few years out of poverty. Given that assumption, which I hope and believe, it’s basically been right to believe that for the last thousand years… we continually grow the population that is not in poverty around the world. Along with that, the fact that they have the ecosystem, they’ve got… eventually, they’re going to roll out some other cool products. Tim Cook’s not going to be here forever either, and/or they’re finally going to…
But they’ve got to at some point develop some more products, new lines. But because they’ve got the app developers and it’s Apple, it can triple I think easier than Microsoft can. I think both can triple from here, but I feel much more confident believing that Apple can, and moreover, like you hit it there, I’ve owned it forever, and it’s a smallish position in the hedge fund, but I’ve owned it in my personal account forever, and I hardly ever even trim it anymore.
Subscriber:
Cody, what is your favorite way to hedge?
Cody:
Cash, because it’s really the easiest way to hedge. But if you were going to force yourself to hedge with more than cash, then maybe buy some puts, date it out a month or two on the SPY, IWM, DIA, and QQQ. Maybe the SMH also. Pick four, five indexes, buy puts that are 5 or 10% on the money, dated one or two months out. That would be my go-to, standard hedge.
Subscriber:
Cody, how much time do you spend watching CNBC? Is there a specific speaker that you find is spot on?
Cody:
I listen to CNBC when I drive sometimes around town, running to the golf course if I get a chance to or something like that. And I maybe watch 30 minutes of CNBC a week. I maybe consume another couple hours if I’m driving. As for my favorite CNBC personalities, I’ve known Downtown Josh Brown for many years, he interviewed me once probably 12 years ago, and let’s see if I can find that link and put it in this transcript too.
Of course I’ve known and loved Cramer for years. My career would be nothing without Cramer’s guidance, advice, opening doors for me. Yeah, I love Cramer, even when I disagree with his analysis. And he’s entertaining.Guy Adami and the other originals from Fast Money too. I was at the original pilot recording for Fast Money, and the Najarian brothers I’ve known since that day. I like them too, right? Oh, and Mike Santoli. I used to try to book him every… I would ask my producers, every week, every day, however often you guys want to put Mike Santoli on Happy Hour or Fox Business, my old show, I’ll take him.
And again, it’s not like I’m necessarily like trading off anybody’s analysis there or something, but I enjoy Mike’s take on things, and he has a real sense of how I sort of agree the world can work sometimes, and other times I’m like, “I don’t even know what the hell he just said.” Then there are a few reporters that I just… I turn the channel on it. I’m not going to disparage anybody by name here, but yeah, there’s probably five or 10 people on that channel that I enjoy. Kudlow when he was on there, I disagree with him a lot of the time, but always enjoy his… There’s a humor that Larry could carry into an economic conversation that’s difficult to bring to the table that I used to get a kick out of. But no, don’t spend that much time on CNBC, but I do enjoy some of the personalities that are on there, several of them.
Subscriber:
Cody, when do you think ad dollars return to Pins and Snap? Are they worth adding to at these levels?
Cody:
Maybe a little Pins, not necessarily Snap. I don’t know. If I hadn’t bought Snap at the low, like when it was at six bucks or whatever, I might be over it. I don’t add to it. I’ve trimmed it and trimmed it and I don’t add to it. Pins, I’d be more inclined to add a little bit to, I don’t know why. They both are probably in the same boat and both probably have some pretty good trajectory. And Snapchat’s user growth and user stickiness shocked me last quarter. I didn’t think they’d do that, I thought TikTok was killing them.
I was going to sell SNAP if the recent earnings report hadn’t been so good. I almost wanted TikTok to be killing SnapChat so I could just let it go. SNAP had fallen to 12 bucks or 11 bucks after that quarter because the numbers had been horrible or something, or even if it didn’t fall, if the stock had been up the next day but the numbers were bad, oh that would have been great. I would’ve been like, “All right, let’s take our victory and get the hell out of here with this Snapchat.” Instead the number’s were great and then I’m like, “Ah, stick with it, Cody. Be disciplined.”
Subscriber:
Cody, do you perceive Square to be outperforming PayPal and Venmo? Everyone I know is using Venmo only, especially young people.
Cody:
That is a good call. I keep wanting to believe that Square Cash App is killing PayPal and Venmo, but I’m not sure it’s true. I think my wife uses Venmo. I don’t use either. Can you believe that? I went on the Square Cash App a year ago, I don’t know. Whenever you could start buying bitcoin on the Square Cash App, I was like, “All right, great, I’m going to go check that out.”
So I went in there and tried to buy bitcoin and they were like, “Hey, take a picture of your driver’s license or something.” And then they’re saying, “Hey, now we need your bank account,” or something. I got about halfway through it, and then there was something that kept… It was, “You’ve got to do this one more thing,” and I was like, “Yeah, I’m not doing that thing.” I don’t remember, but at some point I got bogged down, I couldn’t do it. I’m not a good source to judge these apps as products, really.
I do have my Apple Pay set up, and I think I’ve used it twice. I’ve wanted to use it during the coronavirus now, if I go into the… what in New York you call a bodega, out here you call a convenience store. I go in there maybe once a month now, right, since coronavirus. I may have been in a store four times because my wife does the shopping. I’m the designated not shopper. When I go in I’m like, “Oh, I should take that cash out.” Instead I usually go find a 20 or 40 bucks or whatever. I find some $20s in my office. I don’t have cash in my pocket these days, because I’m not going to stores and the cash is gross with germs. Who needs cash when you’re not going anywhere?
But I go find some cash, I wipe the cash down with Chlorox wipe, and then I go in and I pay with the cash, and I just tell the person to keep the change. Whatever it is, just keep it.
Here’s a theory for you. If you have enough money to subscribe to Trading With Cody, you probably should never take single dollar bills or any cash change back, ever. When you pay with cash, if anybody ever is handling that cash and trying to give you change, they need that change more than you do. Give them the $2, give them the $4, give them the $8. I don’t care. If it’s $12, you’re buying beer and it’s a $12 six pack because you bought some local good brew, and you go in… If you’re paying a $20, bam, out of here. That’s an $8 tip for the person working at the convenience store. Do it. You don’t need that $8. They need the $8.
My theory is, if you are actually touching cash and giving it to someone who has to touch cash as their job, you should not keep any of the cash change. I mean maybe if it’s too much change, I understand. You’re paying with a hundred and it’s a $38 bill, okay, okay, okay. But give them $12. You should never have a single dollar bill in your pocket if you’re subscribed to Trading With Cody. If you’ve got singles in your pocket right now, I want you to cancel. Just kidding, just kidding about the last. I can only tip those guys because you guys subscribe.
Subscriber:
Cody, do you think we will revisit the March low? If yes, will we go even lower?
Cody:
No. I don’t think we’re going to revisit the March low any time soon. I do think it’s possible we revisit the March low in the next year or two. I think it’s maybe a one in six chance that we touch those lows in the next year or two. But I also think it’s only a one in six chance that the market can rally another 15% to 20% from here.
I think the most likely scenario is that we just muddle along and the bulls get bored and the momentum chasers keep losing money and bears keep shorting and then having to cover in the rally. Sometimes the market just wants to grind. We’ve been doing that for a couple of weeks, it feels like, right? Go look at that Spy chart. You know where the Spy was one month ago today? 0.2% lower than it is at this moment. Is the market still up, or is it still down? I don’t know. You know what I mean. The market’s basically exactly where it was one month ago. I think that might be here for a while. I think we might just turn around, sector rotate. Don’t be greedy. But don’t be scared.
Subscriber:
Cody, what is a good price to get into Amazon and PayPal.
Cody:
I mean, Amazon I would buy a little bit and go with it. I don’t own PayPal. I talked about it last week, I just hate the service, and I don’t know if I ever will. So I don’t have good advice for you on PayPal. Anybody want to jump in on this chat and interact with me?
Subscriber:
Hi. I follow people, but I happen to follow you, Arne Alsin and Ark Investment. The thing I’m actually looking for is do you actually follow any non-revolutionary companies? Because I try to sell cover calls by the week, but I really don’t want to… My portfolio has a lot in common with you, Arne Alsin and Ark Investment.
Cody:
Arne Alsin?
Subscriber:
Yeah.
Cody:
Arnie’s a total value investor, or has he changed his stripes?
Subscriber:
He’s 100% revolution investor for the last five, 10 years. He’s doing awesome. He’s no longer turning around from 20 years ago. He doesn’t follow the same 50 stocks he used to follow with.
Cody:
Wow. Because I’ve known Arnie for many years.
Subscriber:
He’s been crushing it.
Cody:
Well, he stole my playbook.
Subscriber:
Like I said, he changed from turnaround to revolution six years ago, seven years ago.
Cody:
Well I created the revolution, I created revolution investing. Ark stole my damn playbook too, man. Come on, I’m the original. I owned FANG before it even existed. Those guys are posers. They all just want to be me.
Subscriber:
Cramer says he invented FANG so…
Cody:
Yeah, okay, Cramer invented FANG, but he created FANG when they were a half a trillion dollar company each. I had a FANG in my portfolio, Facebook, Amazon, Nvidia, Google years before they were considered FANG- I’m kidding here, you know. It is what it is.
I will say, in all seriousness, I do take pride that this idea of finding the most revolutionary companies and getting in front of them, I’ve based my entire career on it for a long time, and I actually didn’t know Arne had shifted stripes. I respect success, though. If people shift stripes and they succeed, awesome. If people don’t shift, if he was still doing value investing and was killing it, or turnaround investing and was killing it, I mean whatever works. Anyway, I got my ego going there. Sorry, what was the question?
Subscriber:
What are there other things outside of revolution investing and technology that you would buy?
Subscriber:
Well you’ve seen me do Campbell’s, like I own Campbell’s Soup since 30.
Subscriber:
You’ve had Dell, you had Campbell’s.
Cody:
Yeah.
Subscriber:
But recently I haven’t really seen anything that wasn’t pure revolutionary stuff from any of the people I follow, which is kind of tough because I like to have a little bit in some more stable things, with a little less volatility.
While I have you on the line, Square is normally for the un-banked and under-banked, and they hit a big growth in the south and big growth with the stimulus checks. That’s the bull case on Square. And Bitcoin, I did it through Square, it’s a bit of a pain in the butt to get started. They limit how much you can put in and stuff like that, but eventually it’s a lot easier way to get bitcoin.
Cody:
You do think kids are using Square Cash App?
Subscriber:
Well, foreign countries are using it a lot. The under-banked Cash App is one of the quickest ways to get a stimulus checks, for small banks and for small businesses.
Cody:
Right, but I’m saying, kids and my wife send money back and forth on Venmo constant, right? Are any of them using Cash App in that same way in the United States?
Subscriber:
Well I don’t really know many kids, so… but I definitely know that Cash App is taking a big chunk of the south because they had no bank accounts and their growth is coming from poor people in the south to get stimulus and for… They have a real quick into the-
Cody:
Where do you live, Ron?
Subscriber:
I was in New Jersey, but now I’m in Vegas.
Cody:
Oh. What do you do, if you don’t mind my asking?
Subscriber:
I deal for casinos.
Cody:
How’s life, man?
Subscriber:
Well there is no job for the future, but I’ve definitely gotten into GDM, golden gaming, and like MGM, and sold some calls against them, because eventually these casinos are not going to necessarily… MGM’s not going to be bankrupted in the near future, and I think from 40 to 35 to 15, I think that’s a good strategy because it gets me to 10% in a week or two weeks.
Cody:
Yeah, the cover call strategy, as long as you’re comfortable getting it called away from you if the thing spikes, which sometimes, especially right now, there’s something to be said for that. Like if something rallies 20, 30% and you don’t really want to-
Subscriber:
Well, I would leave 33% or 40% uncovered, and take the big… take-
Cody:
Look, Ron, if I could just… I always tell people that trying to invest or trade for a living without another source of income is… it’s almost impossible long-term, because at some point if you get cold or the market goes against you or whatever it is, the dual stress of needing the income plus losing the money that is your nut… I just want to give you some life guidance at all if-
Subscriber:
Oh, I deal poker for a living.
Cody:
Make sure you got some other income streams working too.
Subscriber:
Yeah, I deal poker for a living.
Cody:
Well right, but that’s what I mean. When’s that coming back?
Subscriber:
It’s not. A year probably, at least.
Cody:
I don’t mean to put you on the spot.
Subscriber:
No, go ahead. I’m fine.
Cody:
What are you going to do for the next year? Are you going to just try to generate income off of trading?
Subscriber:
For the next year, I mean eventually I’m… Well, pretty much nothing. I’m trying to get unemployment from New Jersey, but it’s chaos.
Cody:
How long have you been a Trading With Cody subscriber?
Subscriber:
I don’t know. In my lifetime I’ve been a pretty poor investor overall, like I’ve done-
Cody:
How long have you been with Trading With Cody?
Subscriber:
I don’t know, a couple of years probably. I followed fromthestreet.com back when they had RealMoney Pro.
Cody:
That makes sense, that’s why you’re asking Arne and… All right, look, I encourage you to think about starting that business you’ve been wanting to start, I encourage you to think of alternative income streams that take time and energy from you and not capital, like trading does. The other thing to actually just… I’m sorry, man. This sucks. That genuinely doesn’t do you anything, but we all… That’s why I wanted to ask you about it, because you’re the person that is impacted in this world right now in ways that… What do we do to help? I mean-
Subscriber:
You’ve got to wait it out. The question is what would I like to train for? Because you look into like programming or something like that, but then you think well, AI is going to have such a strong… overtaking that industry. Where do you go to educate yourself for, like I say a year or two, for another job?
Cody:
That’s a good question. Great point. AI itself. Go to where it’s going. Forget the coding. Become the AI expert. Buy every book on AI. If you’ve got the time and interest in doing it, man. I don’t know how you could fail becoming an AI anything. For the next 10, 20, 30 years, you’ll have a career.
Subscriber:
Maybe, but I hesitate to get into anything like with AI because I mean, to me AI is basically based on programming and-
Cody:
Sure, sure, but again, there’s different levels to it, right? You could find a niche. Artificial intelligence industry is going to become… it’s going to grow from 10 billion to a trillion dollars over the next five to 10 years. That trillion dollars creates… who knows the different jobs for marketers involved with AI who understand… As long as you can ground yourself in that technology, understanding of it… you don’t necessarily have to be able to do it, you just have to be in the industry.
Subscriber:
And by the way, I’m sorry for hijacking the chat. You might want to get back to some stocks.
Cody:
Let’s do that. Good question, I appreciate your time Ron. Side note: One of the things we’ve been doing here in Ruidoso is we’ve been buying… we partnered with the local owner of Pizza Hut, a friend of ours, and we buy gift cards so when people go to the food bank and pick up food they actually can also get a Pizza Hut gift card so they can have some food delivered.
Subscriber:
That is actually one of the problems society is having now, because I know a lot of people that have had to go to food banks, and food banks are incredibly hard to get into. Miles-long lines. Sometimes when you go out there and sit there for several hours, all you get is onions.
Cody:
And if anybody else wants to do it, just call your own local food bank too, by the way.
Subscriber:
I would just say that I think that there is a lot of speculation in the market. I have some exposure to small cap stocks, and I think that what’s really happening is that… and this theory has been somewhat proven, this is what we’re finding, is a lot of people who are staying at home right now. There’s nothing to gamble on in sports. People are finding themselves really, really not productive, and they’re putting their money on very speculative items. The volumes are just staggering, Cody, on these small cap stocks.
Cody:
Look, man, great point. Yeah, I hadn’t thought that through, but there is certainly… Ron, I hope you don’t mind me using you as an anecdote here. But he’s a good example, right? Instead of working and dealing cards, Ron’s at home and like, “Let me do some trading.” And that probably has happened with millions of people around the United States, and of course in general people that are trying to trade and make money quickly are buying speculative small cap stuff. And it’s a good point.
Subscriber:
And that never ends well.
Cody:
Right. That’s, of course, the next thing I was about to add too, the problem is of course that nobody wins with that. Only the guys who are selling those shares on the inside are making money now.
Subscriber:
How about Stitchfix with the stay at home and shopping? It’s going to be breaking out a little bit.
Cody:
Yeah. I missed it. Again, that’s like FSLY, man. Or another one, Wayfair. I mean they gave Wayfair away at $25 bucks, down from $150, in March. Well, it was $150 last year. Hit $25 at the bottom of the crisis, March 23rd or something. I haven’t looked lately, because I had to take it off my screen when it ran to $150 and I was just so mad at myself for not having gotten in some of it near the lows. Ah, I should have seen that one. Ordering furniture online, ordering clothes online. Stitchfix, same thing. But at same time, you can’t be in them all. And I want to own the best. And I haven’t done enough homework on Stitchfix to guess whether it’s the best or not, but my instinct is it’s not necessarily revolutionary or something. But it’s a good company. Certainly in the right time and right place. And the stock… I haven’t looked at that chart recently, but I know they were giving it away too and now it’s rallied. So if you’re comfortable chasing breakouts, then yeah, if you like the company long-term, then yeah. But personally, I’m not in.
Subscriber:
Cody, do you believe Slack to be outdoing or even competing with Zoom? My wife at JP Morgan, the college kids, the high school kids, are all using Zoom. Can’t find a soul using Slack.
Cody:
They’re not mutually exclusive services — you can use Zoom inside of Slack. I know a lot of people are using Slack, but I know everybody is using Zoom. I use and own them both. I actually have a bigger position in Slack than I do Zoom. It’s partly for valuation reasons though.
Subscriber:
So is it too late for Zoom? I thought it was too late at 104. It seems like it could easily be duplicated by a bigger, better company.
Cody:
No, it can’t. You’ve got to invest, you’ve got to spend time, you’ve got to program, you’ve got to build. And Zoom has done it and gotten there and developed it and delivered. And certainly competitors can and will come out, and it’ll be tough to displace the critical mass that we all fill with Zoom comfortability at this point.
Subscriber:
Is Elon Musk’s insanity helping or hurting Tesla long-term?
Cody:
Clearly it’s helping. The stock’s gone from 15 to 800 since he took it public. I can’t stand the insanity, but it’s sort of like with the Richard Branson topic earlier, if you’re going to bet on him you’ve got to bet on him. If you trust Elon Musk you’ve got to trust him. But I’m about ready to strangle him with this. Grimes baby naming, the family situtation, etc…
Subscriber:
Cody, Disney’s opening, albeit in a small way, does that give you some comfort holding it going forward?
Cody:
Look, I mean I’ve had comfort holding it or I would have sold it, but no, I don’t… Like the near-term small opening for Disney doesn’t mean anything. Doesn’t help. I guess it doesn’t hurt. But eventually we’ve… Disney’s just got issues, and coronavirus is impactful on those issues. So it’s a smallish position now, because I had to take some losses, because I was trimming it, and I trimmed it down quite a bit. It’s not one of my biggest positions anymore, at all.
Subscriber:
Thoughts on the Uber earnings?
Cody:
Uber Eats… If you read my latest positions right up on Uber from a few weeks ago, they almost just repeated what I said they were probably going to do. The core business of ride-sharing is down, and going to be problematic, but the Uber Eats grew like 38% revenue growth or something. I’d like to see them buy Grub up. That’d be great. Take out the competition and scale. You might want to short lift, keep your Uber. But Uber’s critical mass and presence around the globe, along with their Uber Eats business, makes me keep the stock.
I was supposed to go into the Trading With Cody emails. My wife told me that this morning before I left. “Make sure you look at the Trading With Cody emails.” So here we go.
Cody:
Hold on, my wife is calling. Hi honey, you watching the Zoom chat?
Cody’s Wife:
Oh, I thought it was at 10:00 our time.
Cody:
No, at 10:00 eastern.
Cody’s Wife:
Oh okay, I’ll let you go.
Cody:
All right, I’ll call you back. We’re in the middle of the chat.
Cody’s Wife:
Yeah, sorry. Bye.
Cody:
Timezones, man. Timezones are brutal. I got a question for you on that note. What the hell are we doing with timezones? Can’t it just be the same time everywhere? I don’t need to remember where the time zone that way… It’s so much harder to keep track of that time that timezone is versus what the timezone I happen to be in, especially when you’re traveling. Wouldn’t it just be easier if 10:00 AM everywhere is the same? That way, if you’re in China, well, 10:00 AM would always be nighttime. If you’re in the United States, well 10:00 AM would always be afternoon. If you’re in Hawaii, it’d be just before dawn. Time zones make no sense.
Here’s another one. Why don’t we come up with a metric system for time? I mean, seven days in a week? Who made up that number? Or sixty minutes in an hour. Can we come up with a metric time system? This old English, British standard of timekeeping is BS. We should have 10 hours in a day. We should have 10 days in a week, 10 hours in a day, 100 minutes in an hour, 100 seconds in a minute. Come on, people, let’s get on it. And don’t even get me started on daylight saving stuff.
Subscriber:
Cody, would love wisdom on how to treat the next generation, if you will, from your point of view. How to build a position in a high-flying stock? For example, I built portfolios for each of my children when they were born and have since turned them over to them. They are all in their late 20s and early 30s and two are married. One loves Shopify and has about 100 shares, I think. It has gone up. The name of the stock’s probably not as important as the philosophy, to build a 1000 or 2000 share hold.
Cody:
My thoughts on this are mainly that it doesn’t matter how many shares. I never think about how many shares I own, or how many shares I’m buying. My brain works in either dollar terms or percentage terms. So if your portfolio is $10 million, you know what amount you want to be selling and buying in dollar terms. Or you just look at your portfolio as whatever number is 100%. You have a $100,000 portfolio, that’s 100%. You have a $100 billion, it’s 100%. Just do things in percentage terms.
You could apply that with your overall approach to building wealth too. Let’s say your portfolio’s $100,000, you make $300,000 a year. Over the next five years, you’ll probably save more than your entire portfolio is right now. So keep that in mind too. That’s again why you can sort of take bigger risks when you’re young and upwardly mobile, because your portfolio is not as important as the income you’re about to generate.
So my advice to the next generation, is to think in percentage terms, and keep in mind that you can probably make a lot more money working than you can investing, unless you want to be a hedge fund manager.
Subscriber:
They seem to really be going after the semiconductors. It doesn’t seem like the kind of thing you really care about, like the timing. But I’m wondering whether you think that that’s because this is a group that’s traditionally seen to be kind of economically sensitive. Semiconductor stocks are underperforming other tech.
Cody:
You think so? That’s partly because other tech is always made up 30, 40, 50% of Apple, Amazon, Google, and those companies are not at all into semiconductors. So in some sense the semiconductor world is a better tell of what really is happening in the tech sector than the triple Qs, because the triple Qs get overly influenced by FANG, and the trillion dollar companies out there.
I’m not a technical analyst, right? You guys know I just do my own brain thinking and then I see technical analysis and it can filter into my thoughts or something. But if I had to bet, it looks to me like the semis are about to lead, one way or the other. If the semis get nasty, I think the IWM’s going to get even nastier. If the semis get nasty, I think the triple Qs are going to get nasty. If the semis get nasty, I think the diamonds even, like the Dow Jones industrial stocks, are probably going to get in some trouble.
I don’t know what you do with that. By the time the semis are telling you that’s going to happen, all that stuff’s already going to be happening. But there’s certainly an impact on the semis today, because of the flare up again of China-US trade war, and that’s the type of thing you buy. If you’ve been wanting to buy Qualcomm and you sneak in there and buy it when it’s down 6% because of a headline that has nothing to do with actually Qualcomm itself. If you’ve been wanting to buy Nvidia…When sectors get sold across the board, it gives you opportunity to pick a name.
You know what drives me crazy? I can’t tell you how many times I do this. Right now, it’s just like let me just pull the quickest way, just go over to Google and type in SMH so I can see the chart. Type in SMH on Google. That’s what I’m going to leave you guys with today. And I’m going to go like this as I do it. Do you know what SMH stands for? Shaking my head. You see me, I’m now shaking my head, SMH, because I just wanted to look at the SMH details really quickly on Google, but it’s not as easy as it should be. You google SMH, it doesn’t pull up the stock. It gives you Urban Dictionary’s definition for SMH.
Be careful out there, guys. Don’t be scared though. Stay the course. Stick with the good names. But don’t be greedy, because it aint a great pitch right now. Peace, love, happiness. Be careful. Thanks for being a part of this.
