Biden’s Chip Plan, Building Shorts, Working Longs And More

Here is the transcript from this week’s Trading With Cody Live Q&A Chat.

Q. In a call with CEOs, Biden doubled down on a $50 billion plan to invest in chips. Biden read from a letter from 23 senators and 42 House members backing his proposal for $50 billion for semiconductors.

A. Why do people even pretend that Democrats care about poor people and that the Republican Democrat Regime would ever do anything to stop sending trillions of dollars of welfare to companies like Intel and Jeff Bezos’ Blue Origin or Elon’s Tesla and so on? What a joke it is that liberals pretend Democrats are liberal and that conservatives pretend that Republicans are conservative. They’re both just doing whatever their corporate masters tell them to at all times.

Q. Not a very good day to be recommending shorts when the meme stocks and Reddit are pushing GME and AMC. I respect Cody’s and his analysis as well as his astute understanding of the markets. However, I have found the last few recommendations to be a bit confusing going from strong conviction to sell in such a short time period . SPCE, COIN and U for example have gone up considerably higher. While he could be right on the short recommendations be careful on timing. It seems like the retail speculative buyers are alive again and have been given a second life. AND ANOTHER SUB ADDS: Cody usually has a longer term outlook. I shorted BLNK, which had a high short interest, a while ago, but the GameStop squeeze coupled with an over 30% rise on one trading day of BLNK had me covering almost all my BLNK shorts with a big loss that day. BLNK has been melting down ever since. My point is Cody mostly plays long term shorts based on fundamentals. Reddit Wall Street Bets induced spikes could actually present an opportunity for the brave and cautious in my humble opinion.

A. To be clear, I’m not saying that the stocks I’m shorting are about to crash today or next week. I do think that over the next few weeks and months, many stock are going to head lower, including the meme stocks and the retail fomo trades. I agree with the comment that we actually almost want the stocks we’re shorting to spike near-term so we can get our shorts on slowly as they are in rally mode. Be careful shorting though. And yes, guys, the last month has been a bit confusing for most subscribers and for me too….after having been a steadfast bull and getting us in tech stocks and cryptos in years past when nobody wanted them, I’ve slowly turned from steadfast bull to a bit more bearish about the markets. That’s not easy to do after 11 years of a a bull run. But I have to be true to my analysis and my analysis is pointing to being a bit more bearish and less bullish.

Q. More of a mentality question. You recently sold SPCE and it immediately went up 30%+. How do you shake off the would have/could have feelings? I am trying to get better at this for myself. I kick myself for not making an investment only to see it go up 100%, etc.

A. Great question. I am obviously pissed at myself for having given up on SPCE when I did. But I am also aware that I am fallible and will make more mistakes and that I have made many other mistakes over the years. I read a quote from Stan Druckenmiller a few months ago that went something like, “Knowing how many mistakes and how dumb I have been at times over the years, I’m sometimes shocked at how well I did overall.” But part of my Great Reset was all about freeing up my mind and analysis from shackles of my past and I can only do that by taking action and culling the portfolio. I might buy SPCE back at some point, but for now, I sit here kicking myself for a bad move. Mea culpa.

Q. Do you ever get involved in shorting abject stupidity like what’s going with $AMC?

A. I’m tempted to nibble a few AMC puts and/or short a few AMC calls, but you have to be very careful in a bubble when there’s nobody buying or selling this stock based on valuation right now. Valuation will matter and AMC is headed back to $10, I do believe, but timing is tough on these meme stocks.

Q. How far out should we be buying those puts on your favorite shorts?

A. The problem is that the premiums are not cheap for some of these puts on my favorite short ideas, and we don’t know when the tide will truly go out on these guys. So maybe go out a month or less and don’t do too many puts all at once. Give yourself room to nibble and trade around the put positions over the next three to six months.

Q. Markets were not easy in may of 2021. However, staying in cash is not a very good option either with fiat pyramidal fraud. Is there any strategy you could recommend to us if we want to invest in an “anti-fragile” (N.Taleb) way? Taking profit from uncertainty, a kind of barbell strategy betting on the edges. Markets are wild with volatility and in my humble opinion I expect this to last, so it may deserve a thought from you. Would VIX futures do or so, something like your old “pair trades” you used to do? Any other ideas?

A. I think we’ve got a great opportunity to build up some shorts and to let our longs keep doing their work.

Q. I’ve always admired your market sense ahead of revolution investing. This year has been a wild up and down for my portfolio and it’s still below where I started the year. Market makers are not loving our stocks these times and we are in a broader bubble about to pop. I like your reset mindset but have the feeling it is not over yet, and we might be getting closer to the time you pull the trigger to sell almost everything and stick to a couple of names like 2007. If you were to stick to only 2-5 names in the portfolio (pulling the trigger), which ones you would pick? Would that be Spacebook? Any others? Are we being bold enough to cull the portfolio?

A. I’m not sure I’m going to cull the portfolio names much more from here and trying to pick just 2-5 names is too hard for me. I have a portfolio that I balance. Space stocks might not be ready to pop yet this year and Facebook’s already run from $250 where I was pounding the table and calling it my favorite and largest position to $330 now a few weeks later. I like NFLX, QCOM, TSM, and other names here too. But overall I remain in cautious mode.

Q. Feet to Fire, when do you think the world would come out of this pandemic? Or, would C19 be with us for many many years thereby requiring us to take C19 vaccine yearly?

A. The pandemic is probably ending for most of the world, but I do think we’ll need to take occasional vaccines for Covid to keep it under control as best we can. The biggest fear I’ve got about the markets and economy is that one of the hundreds of millions of people in South America or Asia or Africa who have or will have Covid 19 this year or next will enable some sort of gene change in the coronavirus itself that makes it vaccine-proof. The virus is perfecting itself with every mutation and we’re talking the potential for it to mutate another billion times this year.

Q. Cody, you mentioned that you think most cryptos are headed much lower this year. Are you trimming any BTC or ETH at these levels, or are you mainly concerned about the smaller cap coins? Thanks.

A. I’d already trimmed some BTC and ETH over the course of this year but yea, I’d sure rather trim than load up on almost any crypto right now.

Q. Your emails this week have been exceptionally cautionary in tone. Is this you “pounding the table” for your subscribers to lighten up?

A. I’m not sure I’m pounding the table for subscribers to lighten up as much as I am just, as usual, trying to convey what my analysis is telling us. And my analysis is certainly a lot more cautious today than it was last year or just about at any point in the last ten years (there have been a few times in the last decade that I’ve also been a bit bearish, but those were more short-term-ish). Also, every anecdote I see out there is a bearish one– nobody’s scared, everybody’s buying cryptos and tech stocks and greed is rampant. Those are bearish anecdotes.

Q. What is your feeling on VACQ warrants? Do they interest you at all or is the common the only place you’re comfortable with?

A. I stick with the common.

Q. What rating would you give $VACQ and $FB at the current valuations?

A. I’d probably rate VACQ a 7+ an FB would be a 7.

Q. Any thoughts on the autonomous vehicle race? Is mobileye the clear leader? More importantly, will autonomous driving ever happen and if it does not happen how big is the market for less than fully autonomous driving. This brings us back to who the real leader is, i.e. who has the best technology today. AND ANOTHER SUB ADDS: Elon Musk promised a big improvement on Full Self Driving with its vision only sensors. I hope I could get the update on my Model 3 in a few weeks to judge that for myself. Personally I have a lot of doubts if Level 4 could even be attained for at least the next couple of years. I saw GM Cruise driving freely in SF on YouTube. It looked impressive but apparently the trip was geofenced.

A. Mobileye is not the leader. Tesla is. GM’s technology is surprisingly good too though. I do think within two to three years, Tesla’s going to have a lot more Full Self Driving technology working, but I’m not sure true Level 5 autonomy is coming before another 5 years or so.

Q. What about Waymo for autonomous driving?

A. It’s up there, but it’s still trying to figure it out too.

Q. With your recommendation to sell any remaining GLD as part of your (and our) reset… and with, loosely characterized, the craziness on the crypto side and your general caution about a possible bubble burst overall… other than possessing actual gold, what can we do to be in good shape if gold ETFs, miners, etc. continue to rise? Do we scale back into ETF’s, cautiously, at this point, or what? Thanks.

A. I shouldn’t have sold my GLD, but it was necessary for me to completely free up my mind and analysis from past biases. I still don’t like gold miner stocks, but I still think gold is a must-0wn and I might buy some GLD back soon.

Q. Do you think that Larry Page and Brin might be working on some secret project?

A. I think Google’s got a lot of secret projects they are always working on.

Q. I was wondering your thoughts on SNOW?

A. I like SNOW as a company, but the valuation’s still a bit too rich to feel to good about loading up on it here.

Thanks for the questions everybody. Rock on, have a great weekend!