Defense Revisited, What Can Go Wrong Already Is, The Next Market Leaders, Etc
Here’s the transcript from this week’s Trading With Cody Live Q&A chat.
Q. You mention in write ups that you’ve been positioning us to be defensive over the past year. Is that true? I feel like all we’ve been doing is buying/nibbling all the way down.
A. Here’s some of the many samples from the last year when I repeatedly told us to remain defensive and cautious and cash-heavy….That was my stance for the last year or so since my Great Reset….up until maybe the last couple weeks as I’ve started saying we should get less cautious and defensive and start using some of that cash:
Trade Alert: Strategies For This Blow-Off Top Market –February 10, 2021 by Cody Willard
Trade Alert: Be More Cautious As The Bubble’s Probably Popping – May 24, 2021 by Cody Willard
Trade Alert: Get More Defensive Into What’s Likely Blow-Off Top Action – November 5, 2021 by Cody Willard
Economy And Markets Analysis: This Ain’t Goldilocks Anymore – November 29, 2021 by Cody Willard
Fog Of War And Dislocating Prices Are Not Good For The Markets – March 29, 2022 by Cody Willard
Remain Cautious As The Great Bubble Unwind Continues – May 18, 2022 by Cody Willard
That’s pretty straightforward defensiveness and caution even in the titles themselves for the last year, no?
Q. Cody, can you give us your opinion of what could go wrong for the market in the next 12 to 24 months? What are the probabilities of a global recession, global energy shortage, global food shortages, continuing Ukraine war, China invading Taiwan, and etc.? Are any of these priced into today’s markets?
A. I’m pretty sure we’re already in an economic recession in most parts of the world. I’m pretty sure there is a global energy shortage in most parts of the world. I’m pretty sure there are food shortages that are getting worse in much of the world, including in Japan as their currency continues to tank and their central bank keeps rates ultra low. I’m pretty sure the war in Ukraine will last a year or five. I’m pretty sure that China won’t invade Taiwan (10% chance that happens in the next five years). I’m pretty sure that since you and I and everybody else are talking about these things these days, that most/much of that is priced into the current quotes already. That doesn’t mean that stocks are about to bounce and go back into a Bubble-Blowing Bull Market though. Many great stocks are probably bottoming right now. Picking great stocks in secularly growing industries from these current levels and leaving ourselves room to add if markets do crash further is probably the right idea. The time to worry about all of these crises was when the economy and global vibe were in boom times. Those boom times are likely to return again even if it takes a year or three to get there.
Q. Hi Cody. You keep talking about trimming your shorts lately but its unclear what % of the portfolio should still be short and how do you determine how much of the short you should sell down each time. I appreciate your thoughts, thank you.
A. For most people at home, shorting is usually a bad idea if not impossible. For a professional hedge fund manager like myself, short positioning can vary between 0% to, I suppose, 200% short at some hedge funds. I typically, even in the hedge fund, keep a bit of a overall long-ish exposure but when markets crash like they have lately I might reduce that exposure more than usual. When the markets went into that Blow-Off Top back in November and into this year, I had more short exposure than usual. It’s not scientific. It’s just a bit of trying to smooth out the ups and downs in the hedge fund performance and to help get a little bit extra “alpha” over time.
Q. What are your five best buys right now?
A. INTC, UBER, IBB, XBI, RKLB.
Q. Cody, your top picks right now are mostly Tech oriented (as expected). They led the market higher. Any thoughts to overall asset allocation on how I might want to weight tech (your picks) vs. other industries that may lead out of this market decline? Normally what’s led the market does not lead after a bear market.
A. I mostly agree. I think Biotech and maybe even old fashioned banks might be the leaders for the near-term if/when the markets stabilize. I think Space Tech will then, in a few years, be the next great Revolution that will lead the markets higher as it creates trillion dollar economies.
Q. Cody, feet -to-fire, how much further do we fall on the big 3 indexes?
A. Feet-to-fire, I’d guess that the DJIA will bounce around 28,000 to 33,000 ending the year at 30,000 (right where it is today). I’d guess that the S&P 500 will gyrate between 3500 and 3700, ending with a lower bias towards 3500 at year-end. I’d guess that the Nasdaq qill gyrate between 10,000 and 12,000 ending the year around 10,500. Total guesses and only because you asked.
Q. “There are decades where nothing happens; and there are weeks where decades happen.” There’s been a lot happening in the last few weeks.
A. Here’s something I wrote with that very quote a year ago: “I hate to quote Lenin, but after studying the Russian Revolution in depth last year, I keep thinking of this quote from Lenin that eventually will apply to all of this, if not today: “There are decades where nothing happens; and there are weeks where decades happen” I leave you with something else I wrote back in 2013, which reads a lot like I could have written it today. Which is another important thing to remember. We might still be in the decades where nothing happens to the US dollar currency reserve economic system. Because trying to time a top in the markets or in an economic system is always very hard!
‘The Federal Reserve and the Government’s Socialist Economic Policies are always going to fail over the long-term. Every retiree and/or saver I know is desperate to find some sort of yield on their money. The FED can print more money, can allow the big banks and giant corporations to borrow money at 0%, can allow the banks to fictitiously mark their worthless assets at any price they want, and the Fed can buy all those worthless assets with yet other printed money, and the FED can allow the big banks to front run all of the FED’s own trading in Treasuries and other securities such that they report 100% profitable trading days each quarter. Does any thinking person think that all of that misallocation of market capital will work out for the best? It will continue to get more corrupt and egregious until they can’t possibly push it any further. You hear all the mainstream media outlets and the talking heads they quote ‘warning’ people about the end of these FED policies, as if that’s a bad thing. Sure, the ongoing stock market and Treasury and other paper asset bubbles will be crushed at some point when the music stops. So the policies are all designed to keep that music playing as long as possible. Whatever the cause of the next Black Swan Crash, you need to have taken some precautions to prepare you and your family for it. Buy physical gold and silver bullion and coins. Buy land in crashed real estate markets near where you live. Have some cash. Maybe buy yourself a couple BitCoins, because if the next Black Swan is bad enough, they might work out to be a hugely profitable investment as the dollar continues to be destroyed. Remember that the dollar is down 99.5% relative to gold since the Federal Reserve was created back in 1913. And as I just explained above, that 99% of that collapse in the dollar relative to gold was BEFORE they created all these new ways of devaluing the hard-earned dollars in your bank account.’Is The Entire US Dollar Global Economic System At Risk Of Collapse? Yes, as always and maybe more imminently than most people think. Other than that, there are no easy answers, but we have a disciplined, slow playbook that is built to help us navigate all of this, as always. Be careful, don’t be greedy, be cool.” That’s me quoting myself quoting myself quoting Lenin. Deep thoughts, anybody?
Q. Cody, you mentioned you’re potentially going to pull the trigger on some new names. Are you waiting to wrap up your research/conviction or are you waiting for another macro draw down? Thanks.
A. Waiting for my research and homework and being patient. Not really about trying to time another market melt down but if we get another major market meltdown I’ll get more anxious about trying to get some new names on the sheets.
Q. Cody, the Intel CEO believes they are closing the process gap with TSM and launching new products which will eliminate performance deficits (and market share loss) with AMD and NVDA. Do you believe these claims and how do you track INTC progress in these battles? Also, I’m guessing they delayed the Mobileye IPO due to market conditions. What are you hearing about that?
A. Yeah, I am leaning towards believing the Intel CEO when he says the company has finally gotten in position to start taking market share. Proof will be in the next two quarters earnings reports though.
Q. Cody, how important to your QCOM thesis is a successful launch of new products from the Nuvia acquisition? These ARM based products could lead to a re-rating of QCOM, in my opinion, and are not on the market’s radar it seems.
A. I’m not basing much of my thesis on the integration of Nuvia specifically, but it might be more important than I’m giving it credit for. “Qualcomm Incorporated (NASDAQ: QCOM) today announced that its subsidiary, Qualcomm Technologies, Inc., has completed its acquisition of the world-class CPU and technology design company, NUVIA for $1.4 billion before working capital and other adjustments. The world-class NUVIA team enhances our CPU roadmap, extending Qualcomm’s leading technology position with the Windows, Android and Chrome ecosystems,” said Cristiano Amon, President and CEO-Elect, Qualcomm Incorporated. “The broad support of this acquisition from across industries validates the opportunity we have to provide differentiated products with leading CPU performance and power efficiency, as on-demand computing increases in the 5G era.” Qualcomm Technologies expects to integrate next generation CPUs across a wide portfolio of products, including powering flagship smartphones, laptops, and digital cockpits, as well as Advanced Driver Assistance Systems, extended reality, and infrastructure networking solution”
Q. Hi Cody. You may not like the numbers that much but I look at Disney as one of the most revolutionary companies over time. Their content on Disney+ blows away the other big three HBO, Netflix and Amazon. Just the Star Wars and Marvel stuff alone is awesome! First The Mandalorian then Boba Fett, now Obi Wan which is bringing back Vader like never before! I can only assume the password sharing stuff will get eliminated soon. I just don’t understand why you don’t see this as a forever holding.
A. I agree with you that it seems like Disney should be/is a Revolutionary company and I would love to buy some forever DIS shares at the right valuation. I was just shocked that the valuation is still so high on so many metrics but at $70 or lower, I’d be very interested in buying some DIS to hold forever.
Q. Hi Cody. I wanted to get your take on Helium developing two new tokens (IOT and 5G) in addition to their HNT coin. I understand this incentivizes the build-out of 5G but I’m concerned about the possible dilutive effect.
A. Yes, it’s a fair point you’re making. This Helium incentivization model is still being trailblazed by the Helium team and it’s totally uncharted territory what they’re doing, so I’ve got some Helium but am not adding to it.
Q. Cody, Can you please give us an updated “Latest Positions”. Also, nibble prices on each for those of us that still have cash left! Everything has come down so much but if I look out to charts of 2000 and 2008 we could have a long ways to go down? Thanks.
A. Yes, I’ll do it next week.
Q. Cody, I found a great local wearable health tech play, Movano (Move). They have developed a micro chip that can measure body temp, blood pressure and the key factor- Glucose. They have an incredible team. CEO is from Medtronic and is an expert. They brought in a team that has developed Apple products and recently someone integral with developing Fitbit. They are slated to start sales of ring before Christmas of this year. They have a $72 million market cap. Think this could be a 100 bagger? Thought you could do a call with team.
A. Thank you, will take a look.
Thanks for the great questions everybody, that’s a wrap!
