China Vs Taiwan Would Start WWIII, Crowded Commodities, Onshoring Opps, Seinfeldian Fed, And More
Here’s part 2 of a lightly edited transcript from a 1 hour and 20 minute long zoom Trading With Cody Q&A. You can also watch the full video version of this by clicking here.
Farouq:
Cody, it’s Farouq here. I had a question on RKLB.
Cody Willard:
Okay, back to stocks.
Farouq:
Is it bottoming, do you think? It’s pretty cheap.
Cody Willard:
Well, it’s not cheap. That is what I’ve been saying since we bought it. I love the company. I think over time it can be a multibillion, 10-billion-dollar-plus market cap, but on any type of next year, one or two year out estimates, it’s not really cheap.
Let me go over here on my… Let me share this again. Share screen. You see Rocket Lab, I made very conservative assumption of 40% revenue growth. I think that actually is low. You go out five years and that gets you $1.4 billion of revenue.
Wait, it’s not even four… I had to go out further for Rocket Lab to get the numbers reasonable. See, I’m four and six years out, not three and five years out. Let’s just look real quick and see what the estimates are for that top line.
See, it’s 230% this year and then another 56% next year. I think it can do 40% from there for several years. And frankly, guys, it’s not cheap unless you look out four to six years. The same time, I don’t know what Boeing and Lockheed are doing that they don’t just buy this thing for five billion dollars, three billion dollars, or something.
It’d be such a great growth business for them, and they need… Oh, not Roblox, Rocket Lab. So, I bought more Rocket Lab at like 3.60 or something the other day and if it drops below three, I’ll buy more. But in the meantime, I think we got to just sit tight.
Look, the space revolution is going to be a multi-trillion-dollar economy. One of these days, you’re going to wake up and these stocks, the good ones, there’s one other space stock I might buy soon. A small-cap one that recently came out. The two or three good space stocks that I think Rocket Lab is one of, one day you’re just not going to get a chance to buy it down here anymore, and it’ll just keep going and going and going.
It’s a multi-trillion-dollar economy and Rocket Lab could be one of the drivers in it. But we got to get through this bubble crash thing that we’re going through, and the market hates speculative smaller cap, high growth, not quite profitable companies, which I just described Rocket Lab.
So, the market hates it, and it can drop another 30-40%. I almost hope it does so I can really get loaded up in it. The only reason I don’t want it to drop is because I know Trading With Cody subscribers don’t want it to. But I’ll take it down another 30 or 40% and really make it a larger position than it is.
But boy, I’ve been wrong on it for a while. I mean we started buying at 10, 11. We were right initially, take some profits, but it’s been a long way down to 3.50, 3.70, 3.85, or wherever it is at this moment. And mea culpa, I hate the fact that I have it in any account. I hate the fact that I recommended it before now.
At the same time, you guys have been with me long enough. You remember when I bought Apple at $14 a share, which is now a split-adjusted 12 cents or some shit, it dropped 30-40% immediately and stayed there for a month or two and took a year before we were making money on it and took two years before it quadrupled or doubled. And then four years to quadruple and…
These things can get time, but we get in front of trillion-dollar economies, I think it will work out. And we got to be flexible, but… In other words, not load up all at one level, but I do issue mea culpa for the pain that Rocket Lab has caused in my portfolio and perhaps yours.
Farouq:
No, I was just curious.
Cody Willard:
Thank you. Any other questions or should I go to emails? All right, I’m going to emails. The first email I see here is not from… It’s a spam email. It says Christmas in July. Why is it Christmas in July? Shouldn’t it be Christmas in June, which would be exactly six months?
July, it’s… We’re closer to Christmas already. If we really wanted to be opposite, it’d be… Never mind.
Speaker X:
Hi, Cody. Why do you think commodity prices have tumbled lately? Did the market already bake in the recession earlier this year?
Cody Willard:
Commodity prices tumbled lately because too many momentum fake value investors fake fundamental analysis money managers were hiding in commodities. And when everybody hides together… He who hides together loses together, so say market Confucius.
It just got too crowded. It’s like crypto late last year. It’s like mean stocks a year ago. Everybody hides together then everybody flees together, and everybody’s fleeing commodities and… Yeah, I mean it just probably got ahead of itself and there is a recession. Some of those commodities are way ahead of themselves.
It’s already like a perfect storm of war and inflation caused by too much money printing for too long. So, you had inflation and then you had supply chain crises and then everybody’s looking for somewhere safe to hide, and they all went to the same place.
Pratik:
The theme you presented with Intel and other companies eventually onshoring back to the US. Have you ever thought of what stocks could benefit from that, maybe like a Rockwell Automation, something else?
Cody Willard:
Yeah, I think that is, other than maybe space, the clearest multi-trillion… Oops, I just muted you Vincent and it was someone else that was making the noise. Who’s making the noise?
Pratik:
The question was onshoring, that’s the trend, can you elaborate?
Cody Willard:
The redomestication of supply chains is a multi-trillion-dollar trend for the next five years, 10 years. I think it’ll bring higher-tech, things that require higher skill sets to the United States first.
But even making Fruit of the Loom underwear. Do you not think the guys at Fruit of the Loom are sitting around, the board at Fruit of the Loom is sitting around going, “Can we really trust the supply chain that we’ve used from China to get our cotton shipped over there, turned into underwear, shipped back cheaply enough and logistically pulled off well enough that it’s economic?”
And I think there is an economic argument to be made that, look, if we redomesticate our manufacturing of even underwear by using technology and robotics and software and apps and whatever else we use to make it more efficient and laborless as possible, you can bring these factories and things back to the United States.
And yes, the robotics is probably somewhere we need to really be finding some good names and I’ve been working on that. Just valuations are still a little bit problematic, so I haven’t pulled any triggers on it yet.
For sure, and I welcome your input if any of you have stock names, company names that are purist plays on the redomestication of factories to the United States and redomestication. The onshoring of supply chain is going to be a big trend and we need to invest in it.
And I think it can actually save the economy from going into a recession if it starts up quickly enough. We’re probably already in a recession. Let me put it this way. We could probably quickly get out of the recession if that starts up quickly enough.
Pratik:
And one follow-up to that if… You said China invading Taiwan is a 10% probability, which I was surprised to read when that’s all everyone talks about. It’s eventually going to happen. Why do you only think it’s 10%?
Cody Willard:
This is why. If China invades Taiwan, Tesla loses access to chips. So does Apple, so does Google, so does Nokia, so does everyone but Intel. Nvidia can’t make chips anymore. The United States government for all its faults is not going to let China turn off Taiwan Semiconductor, and I think China knows that.
China doesn’t want the United States coming over there and defending Taiwan. China might have three or four times as many people as the United States. They might have more potential economic engines over there, but if the United States wants to shut down the entire Chinese internet, they probably could. If the United States wants to shut down the entire Chinese energy grid, it probably could.
If the United States wants to blow up any airplane or carrier that China sends towards Taiwan, they probably could. So, I don’t think China wants that fight, and it will be a fight. Look, man, it’s World War III if China goes into Taiwan. This ain’t no Ukraine-Russia where people are like “Ooh, we sort of care. Put up a Ukraine flag to show our support. Send them some money and some weapons and feel good inside myself that I’m trying to protect democracy and citizens around the world.”
Nuh-uh, man. Ukraine ain’t Taiwan. Ukraine’s breadbasket to Europe is not as important to the global world order and the economic system under which we invest as Taiwan chips. That’s it, Taiwan chips are the most important thing in the entire economy. Nothing else matters like Taiwan Semiconductor chips.
That’s why Intel is such an incredibly important company right now. It is the only US company that can fix that. The entire United States economy depends on Taiwan. Did I answer that question?
Pratik:
Yes, you did, and is this why the US is so heavily invested in Ukraine? Is that sending a message to China?
Cody Willard:
Is the US actually heavily invested in Ukraine? No, they’re not. That’s my point. If we wanted to send a message to China, you declare war on Russia and go defend Ukraine. All we’re doing right now is this half-ass measure without declaring war sort of.
Why are my tax dollars funding weapons that are being sent to another country if we’re not at war? We’re not heavily invested in Ukraine. We’re not sending a big message to China, but I still think China’s scared shitless of fighting us.
Pratik:
Thank you.
Cody Willard:
What do you think about ARKG?
What is ARKG? I assume that is a Cathie Woods stock. I don’t think of ARKG as the answer to your question. Oh, the genomic revolution from ARK. Look, you just heard me talking with Amaris, sort of teasing. Yes, I want to find some great genomic companies like DNA…
Amaris has a genetic disorder trisomy 13. She is a one-in-a-million person that could survive having trisomy 13 for seven years and I would love to fund companies that solve that and make investors a lot of money along the way too. But I’d rather find the companies myself. So, I respect Cathie Woods, but I’m not giving her my money. I’d rather do the work myself.
Speaker X:
Farmers receive crop insurance.
Cody Willard:
Yes, but big farmers and giant food conglomerates are also paid welfare to not grow food… I know people who own land in rural Texas, and she is paid thousands of dollars every year. Probably tens of thousands of dollars, maybe six figures, I don’t even know. She’s paid a lot of money every year to not use that land. The United States government taxes you and me and pays her to not grow food so that food prices remain high. Check it, it’s fact.
Speaker X:
Hi, Cody. When I bought the lifetime sub a few years ago, I had 10 annual phone calls. I’m supposed to get 10 annual phone calls with you. I never linked up with you. I still have a few years left. Yeah. Do we still do this?
Cody Willard:
Yes, we do it. Any lifetime subscriber, if you want to be a lifetime subscriber, email Trading With Cody, support@tradingwithcody.com, and ask for the link. We’ll get you set up. I don’t remember what it cost, four or five thousand bucks, maybe 5,500 bucks. But along with getting a lifetime subscription, you get access to me once a year for, I don’t even know, 10 years. So, you can get 10 phone calls with me, and we’d go through your portfolio. People email me their portfolio and I look through it and try to help them with a guided strategy.
Earlier I had a question about how to build a portfolio. Become a lifetime subscriber and I will actually spend some time trying to answer that question with you. I still would end up advising you to also talk to an advisor in that scenario with that specific question with those kind of requests about ETFs and on stocks.
Speaker X:
“Amaris is adorable.”
Cody Willard:
Yes, Vincent, she is. Thank you.
Speaker X:
Hi, Cody, if you believe this bubble will burst more, why will you not sell more current holdings to raise more cash? Is there a scenario that will make you sell all, exit the market decision that you made before?
Cody Willard:
I think he’s talking about back in 2007. I went to 90% cash in my hedge fund even and held Apple, Google, and Microsoft as my only positions. I don’t know. I suppose there is a scenario that would make me do it, but I don’t think this is the time or place to go all cash and freak out about the markets.
As you guys know, I was preaching defense and caution and raising cash last year when things were through the roof. We’ve come down a bunch and I’m trying to slowly but surely put some money to work again. Going through the latest positions writeup the last week like I’ve done, it’s amazing how many positions I sold out of in the last six months.
I mean I already… The question is why will you not sell more current holdings? Dude, we already have. I sold 40% of my positions in the last year. So, my portfolio both personally and in the hedge fund are pretty lean and mean right now. I’m looking for more names, not to reduce names.
Stewart, I hope I answered your question. If you have another one, you’re just asking did I look in chat. I think I did there. All right, going to emails. Next email. Oh, my goodness, we got to pick up the pace here. Here’s someone that wants to talk to me about some stuff. Look, this guy…
What are your thoughts on the recent news of FDA extending the review of Providence’s? Are we selling now? Is it time to give up because everything is going to zero?
This question was sent five days ago on Friday when the market was demolished. You can hear the fear in that question which would not be there had it been written today because markets have bounced from those fearful levels. Including Proverb, which is up about 20% since Friday. 25% since Friday.
I talked to my biotech analysts about it, and it just looks like part of the process. This is, as I’ve said all along, a very speculative small-cap biotech play, and it’s muddling along like it probably should. I didn’t think it was a big deal, it’s just… They’re going to answer the FDA with requested things and get approved or not. I’m holding on. It’s a small position.
Speaker X:
Cody talked about looking at adding new positions. However, the new environment may not be optimal, so assuming that’s why he hasn’t come out with his analysis on new stocks. Is it possible to start slowly sharing these new stocks so we can prepare?
Cody Willard:
I don’t want to give you a name that I’m not buying yet, so no. I mean talk about mixed signals. I’d be like, “Here’s a name you could be buying, but I’m not buying it yet.” And then if it goes up a bunch, I could declare victory like, “I told you guys you should be buying that name even though I wasn’t.”
I’ll recommend them when I’m there, and it’s not necessarily that the current environment is not so optimal, it’s just the valuations aren’t quite where I want them yet. I want to feel a better risk-reward, it’s not about the environment. I don’t know, maybe that is an environmental question.
Speaker X:
Cody, you’ve written that cryptocurrencies were in big trouble and ready to crash. Coinbase recently announced that they’re laying off employees as cryptocurrency markets have been imploding. At what level do you think Coin might be attractive? At what level might you be interested?
Cody Willard:
Zero. At zero I might get interested. If Coinbase were to recapitalize, I might be interested. That’s how bearish I am on Coinbase at this moment and for the next year or two. I just don’t know how you’re going to charge commissions like you’ve been charging.
I don’t know what the business model’s going to… I don’t know how they grow, so no, there is no price at which I want to buy Coinbase unless they can figure out how to get their business turned around, which I don’t know what the answer is, and they don’t appear to either.
Speaker X:
Cody, I’ve been reading that the Fed may be reversing its bond-buying programs. So-called quantitative tightening and that this process might have a negative impact on the markets. What are your thoughts on this? How will this impact your trading strategy in the coming months?
Cody Willard:
This is my impersonation of every financial TV show that I listen to when I drive and or I have on mute occasionally while I’m working. “What do you think the Fed is going to do?” “Well, I don’t know, what do you think the Fed is going to do?” “Well, I don’t know. I think the Fed is going to quantitize tightening.” “Well, yes, they are going to quantify tightening.” “Do you think the Fed is going to raise rates by 75 bps or 100 bps?” “I don’t know, it might be 75 bps, but it might be 100 bps.” “Well, they were doing 50 bps, so now they’re doing 75. They might do 100.” “Well, they might do 75, but they did do 50. They might do 100. What do you think the Fed will do?” “Well, they might be tightening. They said they’re going to tighten. Are they selling their bonds yet?” “Yes, they’re selling some bonds yet.” “Well, are they buying more bonds?” “I don’t know, they might be buying a few mortgage-backed bonds, but they’re also selling some. They’re letting some of the stuff roll off the end of the balance sheet.” “Well, they’re letting it roll off the end of the balance sheet so…”
I’m not factoring the Fed’s quantitative tightening thing into my world much. The Fed is doing what it’s doing. The Fed stayed way too liquid, way too long during the pandemic and after, and it has no choice but to figure out how to fight this inflation battle.
By the time it actually gets its rates up to where the world thinks it should probably be, we’ll probably be in a deflationary cycle and the Fed will start chasing that. You guys have seen me write with links for… I’ll go back 20 years and find all the ways the Fed was wrong every time. They’re still always wrong.
Cody Willard:
Powell might be the worst. Powell has got to go. What are we doing? Powell has zero credibility to fight inflation at this point. Get rid of Powell, that’s the only thing that will help the Fed. Getting rid of Powell gives them a fighting chance of not being wrong at one point. Holy crap, that guy is bad.
Joe:
Quick question, Cody, if you don’t mind. You’d mentioned you traded out the Twitter from the hedge fund. Is that something if you owned it you would sell at this point?
Cody Willard:
Joe, I haven’t looked at it long enough. I haven’t looked at it since I sold from the hedge fund. I have no edge.
Joe:
Okay, thank you.
Cody Willard:
Sorry, one last question because that didn’t count. Joe already asked a question. I’m teasing you, Joe. Anyone else want to ask a quick question though before I go?
Speaker X:
What do you think about Cisco Systems, Cisco? I used to work there, and they had some solid acquisitions in the past few years, and they are trying to switch towards SaaS, software as a service rather than selling routers.
Cody Willard:
I was just talking to Michael Dudman, the aforementioned Michael Dudman last Wednesday. He has a dog named Cisco after Cisco, so we started talking about Cisco stock, and I said exactly that. I said, “Cisco’s actually getting pretty interesting after this recent sell-off here because…”
It’s like in some ways it’s not as exciting as Intel because there’s not a redomestication trillion-dollar upside break an Asian monopoly apart thesis for Cisco. But Cisco at this moment is… Look, here’s what the problem is when I’m going to run Cisco through my numbers. With Intel, there’s little or no growth unless they take market share and/or the fab business explodes, takes off.
For Cisco, what’s the kicker? Maybe they get more companies to use their SaaS instead of routers so it’s recurring revenue instead of… Even the routing business is recurring revenue because there’s a lot of software in it and you always got to upgrade to the latest, best, fastest routers.
Let me just see what the analyst estimates are for Cisco. I bet they’re 1%. 3% top-line growth. I mean reading it 350 earnings next year, 12 times earnings. Would you rather own Intel at 12 times earnings or Cisco at 12 times earnings? I’d rather own Intel because there’s a kicker, potential kicker.
Cisco’s probably a good safe investment. Let’s put it that way. I’ll take another look at it. I’ll dig in.
Thank you, peace, love, happiness. I’ll send out the transcript later. Hopefully, tradingwithcody.com will be back up soon. I apologize if you had a question in the chat on tradingwithcody.com and you are now looking for that answer in this transcript because I couldn’t get to it because the website was not open.
All right then. I’ll leave you with this thought. This was where I got my impression for the Fed. I did this for the SKTLs volunteer Zoom call last week.
Seinfeld:
Well, I had a very interesting lunch with George Co stanza today.
Kramer:
Really?
Seinfeld:
We were talking about our lives and we both realized we’re kids. We’re not men.
Kramer:
So, then you asked yourselves, isn’t there something more to life?
Seinfeld:
Yes, we did.
Kramer:
Yeah. Well, let me clue you in on something. There isn’t.
Cody Willard:
This is the Fed. Remember I’m talking about the Fed. I’m Kramer talking about the Fed now.
Seinfeld:
There isn’t?
Kramer:
Absolutely not. What are you thinking about, Jerry? Marriage, family?
Cody Willard:
Interest rates? Quantitative tightening?
Kramer:
Marriage is prison, you’re doing time. You get up in the morning, she’s there. You go to sleep at night, she’s there. It’s like you got to ask permission to use the bathroom.
Cody Willard:
You got to ask permission to buy a stock.
Kramer:
Can I use the bathroom?
Cody Willard:
Can I buy a stock?
Kramer:
You can forget about watching TV while you’re eating.
Cody Willard:
You can forget about fundamental analysis.
Kramer:
Because it’s dinner time. Do you know what you do at dinner?
Seinfeld:
What?
Kramer:
You talk about your day.
Cody Willard:
You talk about the Fed.
Kramer:
How was your day today? Did you have a good day today or a bad day today? Well, what kind of day was it? Well, I don’t know. How about you? How was your day?
Cody Willard:
What do you think the Fed is going to do? Do you think the Fed will have a good day today or a bad day today?
Kramer:
It’s sad, Jerry.
Cody Willard:
It’s sad.
Kramer:
It’s a sad state of affairs.
Seinfeld:
I’m glad we had this talk.
Kramer:
Oh, you have no idea.
Cody Willard:
And with that, ladies and gentlemen, have a great day. Peace, love, happiness.
