Cash Levels, Anti-Trust Rumblings, Rescued Horses, And Lots Of Stocks
Here’s the transcript from this week’s Live Q&A Chat.
Q. I’m at ~33% cash. I have good positions in the top 5 in the playbook. Is there a percentage of cash you’re suggesting holding at this time? I’m more interested in DBA ETF stuff than values 3-5 years out. Thoughts?
A. Cash levels should be very different for the 25 year old software developer reading this than the cash levels should be for a 75 year old retiree reading this. So no, I don’t have a % of cash I’d suggest for all shapes and sizes of investors. But I do think it’s time to start mostly putting more cash to work than we have been for the last year or so as I’ve been keeping so cautious/defensive as the Bubble-Blowing Bull Market went into full blow-off top and has since turned into a post-bubble crashette. I think the big money will be made by investing in great opportunities in Revolutions changing the world over the next five to ten years than will be made by successfully gaming inflationary cycles over the next few months.
Q. Been a very long term subscriber. Solid work that you do, and have been following you since TheStreet.com days. My question is this as it relates to if the ‘bottom’ is in or likely in: I have been using $225 in 2022 earnings; throw a multiple on this of 18 and I get 4050. Never exact, so was targeting the 3900 level. (This is nominal earnings and not real.) The problem I have with this is if companies continue to see decreased demand overall, how could that E of $225 be even close in real terms, let alone a lot higher like some strategists believe will occur. So let’s stay with nominal of $225 in 2023. Throw a 16 multiple on that and we get 3600. Its never exact as you know, so maybe 3400-3500. Very few people are believing that the consumer could get weaker based on balances in their bank accounts, full employment at 3.6%. But the FED wants and needs a recession, and they want higher employment. And I believe Powell doesn’t want to be Burns 2.0. Bottom line: what’s your thought on these numbers, how can companies make their numbers in Q2 and Q3 with growth seemingly decelerating very quickly (I’ve been in the business 26 years and know that markets look 6-9 months ahead), and I understand you pick equities, but as you know Bear Markets take time to play out. And they haven’t even started to reduce their balance sheet!! With the Nasdaq down only since November and the spx just from the first day of the year, it seems to me that we haven’t had enough time for this Bear Market to play out. Please let me know your thoughts or ask this question on the call. I’m not sure I will be able to make the call so will there be a replay? Thanks.
A. Thanks for the kind words and for sticking around for now 20+ years of my writing this stuff. Long answer short (pun intended), I’m not confident that the current EPS estimates for the S&P 500 can be met for the next six months or year. I think we might already be in a recession in San Francisco while in NYC and probably in Miami right now a recession is just about to start. The real estate prices in the US have to come down or salaries and wages have to go up for the lowest-aid segments of the US society or homelessness is about to skyrocket. Things usually work out for the US and I do think the economy will be fine in another year or two, but in the meantime, estimates for earnings for corporate America writ large need to come down, IMHO.
Q. Cody, I was reading democrats want to push through tech antitrust reform before the midterms and think they have the votes. How will this affect GOOG, AMZN, FB, AAPL, and say MSFT? Thanks.
A. For the last twenty years, I’ve heard that Republicans and Democrats are going to finally start actually enforcing some of their thousands of anti-trust laws and that they’re going to create new anti-trust laws to crack down on today’s tech titans. But as I’ve said every time for the last 20 years when asked about it, I am pretty darn sure that the Republicans and Democrats need/use the money from those tech titans to fund their endless commercials and advertisement. And when push comes to shove, they never do anything to hurt the tech titans but instead create new subsidies and protections when they allow the lobbyists from the tech titans to write any new laws the Republicans and Democrats pretend to create. Rinse, repeat until/unless there’s some fundamental change in the corrupt trillion dollar political economy’s system.
Q from a long time subscriber: 1st and foremost Thank You! I love the zoom video. Love hearing you pontificate. Love hearing your gut reactions, Accents and etc.. (Also there is a mute all zoom feature.) Then again… a triple soy latte order call is fascinating fader. 2. Trading… is… fun…. You said it wasn’t. I’m down 1/3… I don’t care. Was I really up a 1/3? I own good chunks (for me) Tesla, google, Amazon, a ton of Rocket lab, now Intel, FB, Microsoft, MP etc etc. I’m in for the long haul. I can lay in bed do a couple of am (west cost) trades and then go about my day. At 58 I’ve accumulated more saving by investing for 7 years than working in 30 in healthcare IT. Hoping you zoom at least quarterly. Best to the Family, Blessings on you all.
A. Thanks for the kind words! And, yes, I think it’s hard but important to remember we are trying to build wealth for the long-term, not just swing trade, right?
Q. Cody – I recently read that Apple was going to make progress or investigate getting involved in AR/VR. Does this change the thesis on Apple for you?
A. They’ve long been trying to break into AR/VR but have been refining their strategy and product platform ideas. I still own plenty of AAPL in my personal account as I”ve owned it for 20 years almost. I would like to buy some AAPL for the hedge fund at lower prices/valuations. ‘
Q. Where do you have Unity ranked right now? 80% of its highs from earlier this year.
A. I think it’s best not to use how high off an all-time high a stock is right now as the bubble that popped was widespread and huge in magnitude. U is a great company in a great position to make billions of dollars in the VR/AR/Gaming Revolutions in the next decade. But the valuation is still stretched even now. I’d rate U a 7/10 here right now and I’d make it a 8/10 near the low $20s.
Q. Cody good morning sir hope you and yours are well. FTF. Where are Amzn, FB, Tsla in 2025?
A. Ah, the Great Codini says: “Ideas are free, but are the most valuable asset in the world.” He also says: AMZN will be at $220.25 on 2/20/2025, FB will be at $320.25 on that date and TSLA will be $840.25 on 4/20/2025. In 2030, FB will be at $1000 if they win a major part of VR/AR if they have made Oculus headsets as easy to wear as sunglasses. In 2030, TSLA will be at $2000 if they solve self-driving and/or if that robot thingee works out. In 2030, AMZN will be at $300 if they’ve got their own space fleet to help deliver and/or warehouse things from space.
Q. Hi Cody. What would be a nibble price and a big bite price for you on TSLA?
A. Maybe $600ish.
Q. Some observers say the Metaverse is 5 to 10 years away. While waiting for FB to lead us there, are we underestimating the challenges and possible shortcomings of its existing ad based social media business?
A. I’m certainly not underestimating the potential shortcomings of their existing social media ad businesses. But I also think a lot of that is already priced in here and the trillion dollar potential of Oculus isn’t something anybody thinks is very possible right now which means it’s not priced in at all.
Q. Question on Intel… I know you’re in Intel for the shift towards chip manufacturing in the US, but how much of that is dependent on this legislation or bill passing https://finance.yahoo.com/news/davos-2022-chip-makers-could-flee-the-us-in-months-unless-congress-acts-commerce-secretary-says-210302098.html?
A. I’m pretty sure that the Republicans and Democrats will give Intel tens of billions of dollars to help pay for new domestic fabs to make chips in the US over the next five years. Intel should do it all on its own like the big boy it is, but you know how the corporations in the US never do anything big without making sure the fake free-market Republicans and the not-quite socialist Democrats give them lots of taxpayer help and protections.
Q. With Disney taking control of their content, and D2C, while cutting out the control of big cable, was going to transform their business into something much more attractive. Meanwhile, they have acquired Hulu, and bundle ESPN, along with their app offerings. You liked it then, at $128 or so. Have you considered adding “the king of content” to the stable?
A. Yes, I keep looking at DIS every few months and am surprised at how much growth and profitability it needs to attain to grow into its current valuation, even at these current levels.
Q. In your latest positions report at the end of April regarding KD you wrote: “I want to hear a couple more quarterly reports to see if this is going to have a chance for working out for us.” Then last week you closed the position writing: ” I’m closing our my KD and my TLT positions. Neither one worked out.” Why did you change your mind so quickly and not wait for the additional quarterly reports?
A. I always want to be flexible and the more work I did on KD, the less I liked the odds for the company to get to the other side of cash flow positive. Plus, other stocks I’d might rather own with more potential upside and more Revolutionary characteristics have been slammed and are starting to look more compelling on a relative risk/reward basis.
Q. Have you come across Constellation Network and their $DAG token? https://constellationnetwork.io/ https://constellationnetwork.io/discover/hypergraph-network/ You talked about dumping .eth partly or mainly due to their astronomical fees associated with using it. Constellation is a feeless decentralized network that is working off of L0. Already has a couple government agencies on board and is launching their mainnet this summer. Sounds very interesting. Can you consider this a question for one of your AMAs? Thanks.
A. I looked at it just now but stopped when I saw that the CEO’s career was in restaurants until last year. Seems like a long shot for these guys to compete against Cardano, Solano and Ethereum, etc.
I leave you all with a few pictures of the old mare and her baby colt that we rescued from being sent to a packing house in Mexico as they arrived at our ranch yesterday:
