Carbon Credits Scam, Intel Vs TSM, EV Bubble And More
Here’s the transcript from this week’s Live Q&A Chat.
Q. Feet to fire, what’s the biggest threat to our portfolios over the next 12 months?
A. That valuations come down to a more reasonable level and then the traders who love stocks right now decide they hate stocks and that makes the market over correct to the downside and then we get the opportunity (again) to start buying.
Q. Cody, in your recent updates you shared some bearish anecdotes, but you also mentioned results of the latest who’s more scared poll was overwhelmingly bulls more scared, how do you reconcile conflicting indicators?
A. I don’t recall the results of the poll being “overwhelmingly” on either side. I let my brain try to do the analysis and the reconciliation happens as it will.
Q. How would the passage of the US Innovation and Competition Act change your analysis of TSM in the next 3-5 years?
A. I love how the quote from the Republican Democrat Regime is like, “We’re going to be authoritarian by taking billions of your hard earned tax dollars and sending it to one of the richest corporations in the world, Intel, so they can try to compete against authoritarian governments in China.” Or something like that: The real quote from Republican Democrat Life-timer Schumer reads like this: “Around the globe, authoritarian governments believe that squabbling democracies like ours can’t unite around national priorities,” he added. “Well, let me tell you something: I believe that they are wrong. I believe that this legislation will enable the United States to out-innovate, out-produce, and out-compete the world in the industries of the future.” Anyway, like I’ve said before, I don’ think corporate welfare policies are what makes the US beat other authoritarian governments around the world — rather it’s exactly this kind of welfare programs for giant corporations that hinder innovation in this country. Intel is still five years behind TSM no matter how much welfare money the Republican Democrat Regime sends to Intel’s shareholders. The bigger threat to TSM is China perhaps one day deciding to try to take over Taiwan.
Q. At Taiwan Semiconductor’s annual investor and client presentation last week, CEO C.C. Wei revealed that the company is building a semiconductor fabrication facility in Phoenix, Arizona. The goal is for the plant to produce 20,000 “wafers” – a single microchip – per month by 2024. The company said the facility would cost roughly $12 billion to build. However, the total price tag for Taiwan Semiconductor’s planned expansion is much higher. In April, the company said it would invest a total of $100 billion over the next three years to expand its factories’ capabilities. Thirty billion of which it will spend in 2021 alone. And it anticipates building five additional facilities in Arizona over the next 10 to 15 years.
A. Yup, and somehow Intel thinks getting some extra welfare money from the Republican Democrat Regime is going to stop TSM’s progress such that Intel finally somehow catches them? I don’t think that sounds likely.
Q. Regarding the question, “How would the passage of the US Innovation and Competition Act change your analysis of TSM in the next 3-5 years?” I get it that you’re not impressed with this legislation. You don’t think corporate welfare policies are what makes the US beat other authoritarian governments around the world. But I am having trouble seeing an answer to the actual question of how this changes your analysis of TSM in the next 3-5 years. Are you trying to say that it doesn’t change your stance on TSM?
A. Correct, I am sticking with TSM and it’s one of my Top 5 largest positions right now.
Q. Cody, are you trying to say that it doesn’t change your stance on TSM in the next 3-5 years and that it doesn’t change your analysis because it will not have impact because INTC is so far behind?
A. Yes, I thought I was pretty clear when I said “Intel is still five years behind TSM no matter how much welfare money the Republican Democrat Regime sends to Intel’s shareholders. The bigger threat to TSM is China perhaps one day deciding to try to take over Taiwan.”
Cody continuing- The whole reason I always believe that the US will always out innovate China is because China’s corporations depend entirely on the China Communist Government for protections and access to welfare money. Why would we think that following that playbook will somehow enable Intel to actually compete with TSM which is five years ahead of Intel. Government money from Republican Democrats come with strings attached and less-than-noble intentions.
Q. Plus China’s theft of technological innovation that keeps them closer than otherwise they would be on their own.
A. Yup, for sure.
Q. A 2017 report by the U.S. Commission on the Theft of American Intellectual Property speaks volumes, and estimates a cost of $255 billion to $600 billion to the U.S. economy each year, and fingers China as the “principle IP infringer.” In 2020, the Federal Bureau of Investigation (FBI) acknowledged multiple espionage benchmarks: a new China-related counterintelligence case opens every 10 hours; over half of all active FBI counterintelligence cases involve China; and across the last 10 years.
A. Communist governments suck. Authoritarian governments suck. China steals because their system (and increasingly our US system with its endless corporate welfare and protections) incentivizes theft over innovation.
Q. China’s state sanctioned theft is probably even more important as it prevents our ability to pull away from them technologically speaking. They just throw boatloads of capital at recreating what we have actually innovated. But unless this changes, it means China will have the easier path forward, does it not? They have much less work, for the same level of payoff.
A. It’s not like China is ever really catching us. They are always a few years behind our technologies in the US.
Q. Maybe, but between the US and China over the last few decades, one has had a declining middle class and the other has had the greatest expansion of the middle class in the history of the world.
A. True that, but look at the %s from whence they each came and where they are now.
Q. Albeit starting at drastically different levels.
A. Word.
PS. It’s the endless corporate subsidies from local, county, state and federal governments and the endless complicating of the tax code in this country that are the single biggest reason for our declining middle class and rural towns.
Q. I haven’t heard many people talking about carbon credit investing. You repeatedly remind us about investing in trends before they become widely known. Governments push to incentivize/control the economy through future tiered capital costs is gigantic. As it’s very lucrative for Tesla to annually sell their credits, we might be able to get involved in selling them. This talk explains the possible global impact. The good stuff starts at the 9 min mark.
A. What a scam the entire concept of carbon credits are. Look, if carbon is bad, outlaw it and/or fine the companies that are putting carbon into the world. The idea that Company A can get billions of dollars from Company B so that Company B can continue churning out carbon into the world is not helping anything but making the world more corrupt. Anyway, I have a hard time trying to game an artificial marketplace that wouldn’t even exist in a free world.
Q. Regarding the Carbon Credits, the general process goes like this- you take forests, mangroves and the like, which you control, develop them, have a global agency certify them, they give you the carbon credits, then on the open market you sell them annually to companies that need to offset their carbon footprint to achieve carbon neutrality.
A. Right, so the companies buying the carbon credits can keep on polluting as long as their margins are higher than the cost of the credits. Sickening that liberals think this will help stop carbon pollution and it’s equally sickening that conservatives call such a fascist concept a “Free Market”.
Q. That’s a great answer, even if the world doesn’t see it that way. Unfortunately it looks like that scam is about to become huge.
A. It will be huge, but fleeting scam because it’s fake and fake things don’t last and aren’t sustainable or prosperous.
Q. There seem to be a lot of plans for building semiconductor fans in the US. Are there stocks like AMAT and ASML that could benefit greatly?
A. Yes, but I’m worried that much of that upside is already priced into the current valuations of AMAT and ASML, like most of the stocks out there in the market.
Q. Since El Salvador is the first country to embrace Bitcoin fully do you think that more country’s will follow? Feet to fire, will the Bitcoin price fall under $25 thousand this year? Thanks for all you do!
A. El Salvador is a corrupt backward economy and moving to accept bitcoin legally there isn’t going to change that. Other countries will probably one day follow suit, but unless those countries are named Russia and/or China, I’m not sure it matters to the US dollar or to bitcoin’s price. Feet to fire, I’d rather own/hodl some bitcoin than try to game the next 30% move in it.
Q. Is there not an opportunity for blockchain, irrespective of Bitcoin or crypto-exchanges (like COIN)? Which companies provide blockchain technology for the proposed “digital dollar”, not to mention tracking parts, oil, land titles, etc. Thanks for any consideration you can give this.
A. Remember like 8 or 5 years ago, when people were like, “Bitcoin’s probably not going to work, but blockchain is the REAL DEAL!” And now, nobody talks that way since bitcoin did work. I do like what you’re getting at, but I think Ether probably is much of the answer already. I’ll spend some time digging into this concept to see if there are any blockchain stocks to pursue.
Q. Does Astra’s acquisition of Apollo Fusion warrant another look at HOL?
A. Not really. I’m certainly watching HOL and always happy to revisit a stock, but Apollo Fusion is a small start up too and doesn’t change HOL much.
Q. Would you explain the figures used to come up with a 1 and 2 P/S ratio for Uber and Lyft in the latest Trade Alert? I read Uber’s TTM Gross Bookings as $61 billion and revenue as $11 billion, on a $95 billion market cap.
A. We had a mistake in the spreadsheet. You are correct.
Q. Thank you. I’m just making certain that I was reading (interpreting) it correctly.
A. Yes, I appreciate the follow up questions. Let’s make sure I’m communicating what I’m trying to communicate!
Q. Given the error in the UBER spreadsheet, would you still recommend UBER stock?
A. Yes, I didn’t even notice that we’d had the wrong number in the write up. I never thought Uber was trading at less than 1 times sales, I just didn’t see that part when I proofed the write up on Uber.
Q. Cody, the Chinese EV stocks have rebounded! Is this a place you are looking to invest?
A. No, I’d rather short most EV stocks, China-based and/or US-based, than buy EV stocks.
Q. JMIA and MP, do you still like them sir?
A. I would sell them immediately and send out a Trade Alert about selling them immediately if I didn’t like them anymore. I still like them.
Q. Ransomware hacking seems to be getting worse every year. Is there any stock that could benefit from this?
A. I’m working on ZS and CRWD, but the valuations…are…too…high.
Q. I would like your opinion on the Honeywell ($HON) merger of quantum businesses with Cambridge Quantum solutions. I read somewhere that the quantum market could be a trillion dollar market over the next 30 years.
A. I’ll take a look, haven’t looked at old school HON for years.
Q. Vertical take off and landing (VTOL) aircrafts seem to provide solution to some remote travel problems. Do you think recent advances in tech and 3D printing tech could make VTOL a new revolution just like they did to Space Revolution?
A. VTOL is gonna be huge. But again, I think most of the current batch of VTOL valuations are based on lots of optimism and hope.
That’s a wrap, thanks all!
